Tag Archive: automatic stay

Third Circuit Reexamines Defense to Stay Violation

Posted by NCBRC - September 20th, 2021

The Third Circuit’s 1992 precedent establishing that a creditor’s reliance on persuasive legal authority may be a defense to the “willfulness” element of a stay violation is still good law but does not apply to a creditor who argued unsettled law but did not rely on any compelling legal authority to justify its conduct. California Coast Univ. v. Aleckna, No. 20-1309 (3rd Cir. Sept. 9, 2021).

When the debtor completed the course work necessary for graduation from California Coast University, she still owed $6,300 in tuition. She filed for bankruptcy and then requested her certified transcript from CCU. CCU, aware of her bankruptcy filing, ceased its collection efforts and eventually gave her an uncertified copy of her transcript with no graduation date listed on it. CCU maintained that the incomplete transcript was part of its policy that students who owe tuition at the completion of their studies have not technically graduated. CCU conceded that the tuition debt was dischargeable. Read More
Retroactive vs Prospective Relief from Stay

Posted by NCBRC - August 31st, 2021

The bankruptcy court erred when it denied prospective relief from stay based on the same analysis it used when it denied the mortgage creditor’s retroactive annulment of stay motion. Wilmington Savings Fund Soc’y v. Fairbanks, No. 21-1019 (B.A.P. 9th Cir. Aug. 12, 2021) (unpublished).

When the debtor defaulted on her mortgage payments, she hired Home Matters USA to communicate with the foreclosure trustee. Home Matters assured her that, due to Covid foreclosure restrictions, her home would not be sold at auction. Home Matters failed to adequately protect her and her mortgage creditor, Wilmington Savings Fund Society, held a nonjudicial foreclosure auction where it sold the property for $7,000 in excess of the total debt. The sale was the first indication to the debtor that her property was not protected from foreclosure. In an effort to save her home, she immediately filed a chapter 13 petition. Three days later, the foreclosure trustee executed the deed and the purchaser recorded it within the statutory fifteen-day period. A month later, Wilmington moved for retroactive annulment of the stay to validate the transfer, or, in the alternative, for prospective relief from the stay to allow the foreclosure trustee to make the transfer again. The bankruptcy court denied both the retroactive and prospective stay motions. Wilmington appealed to the Bankruptcy Appellate Panel for the Ninth Circuit. Read More
Attorney Fees Intended To Pressure Debtor Unnecessary

Posted by NCBRC - May 27th, 2021

The creditor’s attorney fees attributable to its repeated motions to continue foreclosure proceedings during the debtor’s pending bankruptcy cases were unnecessary given that the automatic stay was in place, and the bankruptcy court deducted those fees from the allowed claim. In re Peta, 2021 WL 608233 (Bankr. E.D. Pa., Feb. 10, 2021) (case no. 2:19-bk-13264). Read More
Smattering of Automatic Stay Violations by HOA

Posted by NCBRC - April 2nd, 2021

Citing six separate stay violations by the homeowner’s association, the district court awarded the debtor damages for emotional distress and property interference. It also upheld the bankruptcy court’s award of punitive damages and attorney’s fees. The court remanded, however, for a determination of whether the damages for property interference should have extended beyond the end of the automatic stay. In re Parker, No. 19-2588 (N.D. Cal. March 22, 2021). Read More
Ex-Wife’s Interest In Marital Residence Does Not Enter Debtor’s Estate

Posted by NCBRC - March 17th, 2021

The debtor’s ex-wife’s interest in the marital residence did not enter the bankruptcy estate even though the property was titled to the debtor, where their dissolution agreement gave her half interest and the debtor was prohibited from unilaterally disposing of the property. But the debtor’s ex-wife did not show that his failure to comply with the dissolution agreement generally, was an indication that he undertook the debts created by the agreement by fraud where the evidence did not support her contention that he never intended to comply. Williams v. Williams, No. 18-1197 (Bankr. D. Colo. Jan. 8, 2021). Read More
Tribe Has Sovereign Immunity from Stay Violation Suit

Posted by NCBRC - February 16th, 2021

Payday lenders belonging to a Native American Tribe enjoy sovereign immunity from suit under section 362 for violation of the automatic stay. In re Coughlin, No. 19-14142 (Bankr. D. Mass. Oct. 19, 2020).

The chapter 13 debtor filed a motion seeking a finding that a group of payday lenders violated the automatic stay when they continued to dun him for payments after he filed his bankruptcy petition. The creditors, all members of a Native American Tribe, moved to dismiss the complaint, arguing that they were entitled to sovereign immunity for their conduct. Read More
SCOTUS Finds Retention of Property Is Not Exercise of Control

Posted by NCBRC - January 18th, 2021

In an unhappy start to the new year, the Supreme Court resolved a long-festering issue in favor of creditors when it found that “mere retention of property does not violate §362(a)(3).” City of Chicago v. Fulton, 592 U.S. ___, No. 19-357 (S.Ct. Jan. 14, 2021).

Here, a number of chapter 13 debtors entered bankruptcy after the City of Chicago impounded their vehicles for failure to pay traffic fines. In their separate cases, the debtors sought return of the vehicles arguing that once they filed for bankruptcy, the City’s retention of the vehicles violated the automatic stay. The bankruptcy courts in each case agreed with the debtors. In a consolidated opinion, the Seventh Circuit found that retention of the vehicles constituted an exercise of control over property of the estate within the meaning of section 362(a)(3). It affirmed. In re Fulton, 926 F. 3d 916 (7th Cir. 2019). Read More
Sixth Circuit Discusses Appellate Jurisdiction

Posted by NCBRC - December 29th, 2020

Where the BAP remanded to the bankruptcy court for a finding on whether the creditor violated the automatic stay by failing to prevent the continuation of a contempt hearing against the debtor, the Sixth Circuit relied on precedent to conclude that the BAP’s order was not final and appealable. Wohleber v. Skurko (In re Wohleber), No. 19-3223/3225 (6th Cir. Nov. 18, 2020) (unpublished). In her concurring opinion, Judge Batchelder argued that the precedent relied on by the majority was erroneous and advocated for adopting a rule that “we have appellate jurisdiction if either the bankruptcy court’s judgment or the intermediate appellate judgment is final.” Read More
Lifting the Stay only for Debtor in Serial Filings

Posted by NCBRC - October 23rd, 2020

Where a debtor makes serial filings for bankruptcy, the automatic stay is lifted after 30 days only with respect to the debtor and not with respect to property of the estate. Rose v. Select Portfolio Servicing, Inc., No. 19-50598 (5th Cir. Dec. 10, 2019).

Five years after the debtor and her then husband bought their residence, they divorced and the debtor’s husband retained the house on the condition that, if he defaulted on the mortgage, he would transfer ownership to the debtor. He defaulted. Although the house did not actually transfer to the debtor until five years after the last payment on the mortgage, the debtor became actively involved in battle with the mortgage creditor. On four occasions, the creditor set a foreclosure date and the debtor filed for bankruptcy to forestall the sale of the property. The bankruptcy cases were pending for a total of 269 days. Read More
$67,000 in Fees and Costs Reasonable for Stay Litigation

Posted by NCBRC - June 13th, 2020

The debtors’ attorney was entitled to approximately $67,000.00 in attorney’s fees and expert witness fees and costs for his representation of the debtors in their action against the creditor for violation of the automatic stay. In re Moon, No. 13-12466 (Bankr. D. Nev. May 29, 2020).

After they had obtained their discharge, the debtors reopened their bankruptcy with new counsel, Christopher Burke, in order to file a motion to hold Rushmore Loan Management Services, LLC, in contempt for violation of the automatic stay and the discharge injunction. After an evidentiary hearing, the bankruptcy court found Rushmore in violation of the automatic stay, but because the date Rushmore learned of the discharge was not established, the court did not find it in violation of the discharge injunction. The bankruptcy court awarded the debtors over $100,000 in actual damages, $200,000 in punitive damages, and attorney’s fees and costs under section 362(k)(1).

Mr. Burke then submitted his fee application seeking $56,150 in fees based on 112.3 hours of work at $500.00/hour, $1,950.30 in costs, and $8,907.64 in witness fees for the expert testimony of John Rao. He further sought an order enhancing his fees by a multiplier of 1.5. Rushmore objected to the fee application generally, arguing that because he did not have a written fee agreement with the debtors, Mr. Burke did not comply with ethics requirements. Rushmore further argued that Mr. Burke’s hourly rate and the expert witness fee were excessive. Finally, Rushmore argued that Mr. Burke was not entitled to a fee enhancement. Read More

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