City Did Not Violate Stay by Failing to Rescind Warrant

Posted by NCBRC - July 17, 2019

City had no obligation under the automatic stay to take affirmative action to rescind a warrant for the debtor’s arrest or to issue a letter of compliance to the state, where the City had taken no post-petition action to enforce the warrant, and the debtor was not in compliance with the court order to pay a traffic fine. Edwards v. City of Ferguson, No. 18-6032 (B.A.P. 8th Cir. July 3, 2019).

When Ms. Edwards filed for chapter 13 bankruptcy, she had an outstanding traffic fine and warrant for her arrest pending with the City of Ferguson. The city had also notified the State of Missouri of the outstanding fine. When the city refused to withdraw the warrant and issue a letter of compliance, the debtor filed an adversary complaint alleging violation of the automatic stay. The bankruptcy court granted the city’s motion for summary judgment and Ms. Edwards appealed to the Bankruptcy Appellate Panel for the Eighth Circuit.

On appeal, Ms. Edwards argued that the city’s failure to issue a notice of compliance to the state was preventing her from renewing her driver’s license. She further argued that the existence of the warrant was a continuing effort on the city’s part to compel payment of the fine.

The panel framed the issue as whether the automatic stay imposed an affirmative duty on the City to take the actions sought by the debtor.

In affirming the lower court, the panel noted that a creditor has an obligation to cease collection activity initiated prior to bankruptcy if such activity would constitute continuing post-petition efforts to collect, as in the case of ongoing wage garnishment or retention of repossessed property. It disagreed with the debtor’s contention that those circumstances existed here. With respect to the warrant, the panel agreed that any attempt to enforce it would violate the stay, but the mere existence of the unenforced warrant, issued prior to her bankruptcy, was not itself a violation. The panel therefore found that the City’s only obligation under the stay was the continued non-enforcement of the warrant, not its rescission. In the absence of evidence of what steps the City had or had not taken to ensure that the warrant would not be enforced, the panel refused to speculate that Ms. Edwards’s fear of arrest was justified.

With respect to the notice of compliance, the court found that “[t]here is nothing in the Bankruptcy Code requiring a municipality to write a letter saying a debtor has paid a fine or otherwise complied with its municipal code when the debtor has not done so.” The mere filing of bankruptcy does not ensure successful completion of the plan and discharge of the debt and, until those things occur, the debtor cannot be deemed compliant. Moreover, the court pointed out that driver’s licenses are issued by the State which was not a party to the action. Where the debtor presented no evidence that she had sought renewal of her license or that the outstanding municipal fine prevented such renewal, there was insufficient evidence that the City’s inaction had the result alleged by Ms. Edwards.

Due to the lack of evidence that the City’s actions or inactions amounted to collection efforts during Ms. Edwards’s bankruptcy, the panel affirmed the bankruptcy court’s decision.


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