On July 24, 2025, the National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) filed an amicus curiae brief in the U.S. Court of Appeals for the Fourth Circuit in Goldman Sachs Bank USA v. Brown, No. 25-1439. The case concerns whether consumer debtors’ claims under 11 U.S.C. § 362(k)—seeking damages for willful violations of the automatic stay—must be resolved through private arbitration, rather than in the bankruptcy courts tasked with enforcing that stay.
[Read more…] about NCBRC and NACBA File Amicus Brief in the Fourth Circuit to Preserve Enforcement of the Automatic Stay in Brown v. Goldman SachsPunitive Damages for Stay Violation Were Excessive
The punitive damages awarded by the bankruptcy court were unconstitutionally excessive where they were seven times greater than actual damages and the bankruptcy court increased the damages on remand because it found the lender’s success at the BAP level would eliminate a substantial disincentive to engage in the conduct establishing the automatic stay violation. Rushmore Loan Mgmt Serv., LLC v. Moon, No. 22-1126 (D. Nev. Feb. 6, 2023).
When the debtors, Adnette Gunnels-Moon and Willie Moon, filed for chapter 13 bankruptcy, they listed Rushmore as a mortgage creditor on a loan in Adnette Gunnels-Moon’s name only, but gave the wrong address for Rushmore. For that reason, Rushmore was unaware of the bankruptcy and continued to dun the debtors for monthly mortgage payments. At one point when Rushmore called Willie Moon, he told Rushmore that he and Adnette had filed for bankruptcy. The debtors obtained their discharge in 2016. But Rushmore, apparently adhering to an unwritten policy of not accepting bankruptcy notification from a third party, continued its collection activity through the bankruptcy and after discharge.
The debtors reopened their bankruptcy to seek contempt sanctions against Rushmore for violation of the automatic stay and the discharge order. The bankruptcy court found in favor of the debtors on the automatic stay claim and awarded $742.10 representing the costs of reopening the bankruptcy. It also awarded $100,000 in emotional distress damages to Willie, and $200,000 in punitive damages. The court found no discharge injunction violation because it was unclear when Rushmore became aware of the discharge. The court also awarded $56,150 in attorney’s fees, $10,857.94 in costs, and an additional $3,500 in supplemental fees.
The parties filed cross-appeals. The debtors sought to reverse the bankruptcy court’s denial of the discharge injunction claim and its refusal to award certain fees, and Rushmore sought to reverse the damages award to Willie. Rushmore did not challenge the bankruptcy court’s finding that it violated the automatic stay as to Adnette, and did not seek to overturn the $742.10 in damages based on that claim.
The BAP reversed the $100,000 award to Willie, finding Rushmore did not violate the automatic stay as to him, affirmed the finding that punitive damages were warranted but remanded for reconsideration as to the amount, and affirmed the finding that Rushmore did not violate the discharge injunction. The BAP also remanded for reconsideration of the fee awards.
On remand, the bankruptcy court awarded $67,007.94 in fees and costs and $3,500 in supplemental fees. It increased the punitive damage award to $500,000. It awarded an additional $14,827 for Adnette’s defense of Rushmore’s adversary complaint, $70,415.95 to Adnette in appellate fees related to the first fee decision, and $45,235.82 in appellate fees for the contempt decision appeal, for a total appellate fee award of $115,651.77.
The court began its analysis with Rushmore’s challenge to the attorney’s fee awards noting that the goal of section 362(k) is to return debtors to their status as it was before the automatic stay violation. Rushmore argued that the bankruptcy court should have separated out the fees attributable to litigation of the discharge injunction and deducted those fees from the total fee award on the automatic stay claim.
The district court found the bankruptcy court satisfied the BAP’s instructions by explaining that the litigation of the automatic stay violation was inextricably intertwined with the discharge violation litigation and therefore the fees were inseparable.
The district court also found that the failure of Willie’s claims did not require the court to reduce the fees based on litigation of those claims because the evidence supporting them also either supported the automatic stay claims, or were relevant to the egregiousness of Rushmore’s conduct. The court observed that, although a bankruptcy court is required to award fees causally linked to a stay violation, it may approximate. “The essential goal in shifting fees is to do rough justice, not to achieve auditing perfection.”
The court also rejected Rushmore’s contention that the bankruptcy court should have reduced the punitive damage award based on the BAP’s instruction to revisit that award in light of its having reversed the court’s award of damages to Willie. In fact, the BAP merely instructed the bankruptcy to revisit the award. The bankruptcy court complied with that instruction.
Therefore, the court affirmed the award of $70,507.94 in attorney’s fees and supplemental fees to Adnette for prosecution of the original contempt proceedings.
The court next addressed the bankruptcy court’s award of fees to Adnette for litigation surrounding Rushmore’s adversary complaint. The bankruptcy court originally declined to award those fees, but did so after the BAP remanded with instructions to revisit the issue. At that time, the bankruptcy court determined that Rushmore’s complaint sought to dismiss the automatic stay claim. Therefore, the bankruptcy court concluded that Adnette’s defense of Rushmore’s complaint was part of her litigation in support of her automatic stay claim. The district court found no error in this conclusion and affirmed the $14,827 attorney fee award.
Rushmore challenged the bankruptcy court’s award of fees incurred in the appeals of the fee decision, the supplemental fee decision, and the adversary fee decision. Specifically, Rushmore contended that the bankruptcy court should have required Adnette’s attorney to specify the amount of time he spent on the issues Adnette prevailed on, and not award any fees for the time spent on Willie’s failed claim for discharge violation.
The district court found no error in the bankruptcy court’s attorney fee award. It held that the bankruptcy court did not apportion any fees to litigation of Willie’s claims. It also held that there was no clear distinction between the evidence supporting the discharge injunction and the automatic stay claims. The court upheld the award of Adnette’s full fees for defending the fee award on appeal.
As to the appellate fees related to the appeal of the contempt order, Rushmore argued that because the bankruptcy court reduced those fees after remand by 20%, Rushmore prevailed on that appeal and the debtors were not entitled to fee shifting. While the court did not entirely agree, it found that “[t]he bankruptcy court abused its discretion in failing to apportion fees for time spent on Willie’s unsuccessful appeal on the discharge injunction issue.” It found those fees both severable as a practical matter, and not related to the automatic stay violation. The court found that it could reasonably calculate the proper reduction, and it did so, reducing the total fee award based on the contempt order by 80%, to $11,308.96.
Rushmore next argued that the awards in general were disproportionate to the actual damages of $742.10 which Adnette incurred before Rushmore ceased its offending conduct.
The court disagreed. It found that section 362(k)’s deterrent effect is furthered by permitting the debtor to recover attorney’s fees for successfully litigating an automatic stay violation. In this case, Rushmore followed an unwritten and undisclosed policy of ignoring third party information regarding bankruptcy of its borrowers. Because it learned early on that Adnette was in bankruptcy but ignored that information without telling her that the information had to come from her to compel action, it needlessly perpetuated the automatic stay violation. The bankruptcy court took these facts into consideration and did not abuse its discretion in calculating appropriate damages.
Turning to the issue of punitive damages, the court noted that, on remand, the bankruptcy court increased the punitive damage award from $200,000 to $500,000. The bankruptcy court based its decision on the reprehensible nature of Rushmore’s position that it need not act on third party information of bankruptcy and its continued collection efforts. It was also persuaded that greater deterrent was needed because the BAP’s decision against Willie’s claims eliminated his ability to sue on his own behalf for Rushmore’s conduct.
Rushmore countered that the punitive award violated its due process rights by punishing it for prevailing on appeal as to Willie.
In reviewing a punitive damage award on constitutional challenge the court considered: “the degree of the defendant’s reprehensibility or culpability, the relationship between the penalty and the harm to the victim caused by the defendant’s actions, and the sanctions imposed in other cases for comparable misconduct.”
Based on these factors, the court agreed that the punitive damage award was unconstitutionally excessive. It found the award punished Rushmore for its conduct to Willie and others similarly situated rather than for any harm suffered by Adnette. It also found an award greater than a 4:1 ratio of punitive to actual damages requires both particularly egregious conduct, and relatively small actual damages. Here, though Adnette’s award of $742.10 was small, the entire fee award was not.
Having found that the bankruptcy court erred with respect to the punitive damages award, the court found that remanding with instructions to reconsider that award would merely consume more time and money in what was already an outsized case. Therefore it calculated punitive damages. It found that Rushmore’s appeals were not unreasonable and it’s conduct not malicious. There was no evidence that it extended to other borrowers. The court concluded that a 1.5 multiplier satisfied the principles of punishment and deterrence. It reduced the award of punitive damages to $128,002.41.
As the district court anticipated, Rushmore filed an appeal to the Ninth Circuit.
Creditor Must Resume Statements After Discharge
PNC’s TILA obligation to provide regular statements concerning the plaintiffs’ debt resumed after the debtors received their bankruptcy discharge even though the plaintiffs’ bankruptcy case was not closed until almost four years later. Polonowski v. PNC Bank, NA, No. 20-151 (W.D. Mich. Jan. 23, 2023).
The plaintiffs had a home equity line of credit (HELOC) with PNC which was secured by a mortgage on their residence. Pursuant to its obligation under the Truth in Lending Act (TILA), PNC sent the debtors periodic statements concerning the debt. When the debtors filed for chapter 7 bankruptcy, PNC stopped sending the statements. While their bankruptcy was still pending the plaintiffs reaffirmed their debt to PNC. On November 15, 2018, the plaintiffs received their discharge, but their bankruptcy case remained open until July, 2022. PNC failed to resume the periodic statements, informing the plaintiffs’ counsel that it would not send statements so long as the bankruptcy case remained open.
The plaintiffs filed suit against PNC in district court and moved for partial summary judgment on the issue of liability.
PNC argued that its obligation to send periodic statements under TILA conflicted with bankruptcy’s automatic stay, and that TILA releases creditors from their obligation to issue account statements when doing so would violate other federal laws. In PNC’s view, as long as the bankruptcy remained open, the property remained part of the bankruptcy estate under section 362(c)(1), and it could not send statements.
The court agreed that when the plaintiffs filed for chapter 7 bankruptcy, the stay suspended PNC’s obligation to issue statements, but found that, under section 362(c)(2)(C), its obligation resumed when the plaintiffs received their discharge.
To the argument that the property remained part of the bankruptcy estate, the court emphasized the distinction between in rem and in personam proceedings, noting that because the plaintiffs had reaffirmed the debt, their bankruptcy discharge lifted the stay with respect to them. The court stated that sending information about a debt was not an “act against the property of the estate.” It analogized the case with one involving the discharge injunction noting that a creditor seeking to collect post-discharge on a debt the debtor had reaffirmed, would not violate the discharge order.
The court concluded that the plaintiffs’ interpretation of sections 362(c)(1) and 362(c)(2)(C) was consistent with the parameters of the automatic stay and with the historical distinction between in rem and in personam proceedings, and that “Defendant’s interpretation is not consistent with either the statutory language or the historical approach to acts against the person and acts against property.”
The court granted the plaintiffs’ motion for summary judgment on the issue of liability.
Mortgage Statements Not Attempts to Collect a Debt
Where statements sent by the mortgage servicer listed the higher, pre-modification amount due, but specifically stated they were not an attempt to collect a debt and did not include an amount in potential late fees, the bankruptcy court erred in finding the statements were in violation of the automatic stay. Freedom Mortgage Corp. v. Dean, No. 22-1469 (M.D. Fla. Jan. 26, 2023).
The debtors had a mortgage with Roundpoint Mortgage Servicing obligating them to monthly payments of $2,102.32. They filed for chapter 13 bankruptcy after falling behind on the payments. Roundpoint and the debtors agreed on a trial mortgage modification which was approved by the court and which lowered their monthly payments to $1,927.15. Freedom Mortgage Corporation then took over the mortgage from Roundpoint. Freedom began sending the debtors monthly statements listing the amount due according to the pre-modification mortgage terms. With each statement, Freedom included a payment coupon. Despite notifications by the debtors’ counsel that the amount listed was incorrect, Freedom did not lower it to the modified amount until after the bankruptcy court permanently confirmed the modification. The court then ordered Freedom to show cause why it should not be sanctioned for violating the automatic stay.
In response, Freedom argued that it was obligated under the Truth in Lending Act to send out monthly statements and that the statements it sent conformed to the Consumer Financial Protection Bureau’s Form H-30(F) and were therefore moored in a “safe harbor.” The bankruptcy court rejected Freedom’s arguments and found its monthly statements were an attempt to collect a debt in violation of the stay. The court sanctioned Freedom in the amount of $15,060.00 representing the costs associated with the mortgage statements and the sanctions hearing.
Freedom appealed to the district court.
The district court rejected Freedom’s “Chevron defense” where it urged the court to adopt the CFPB’s interpretation of bankruptcy’s automatic stay. The court found that defense applies only to agencies interpreting laws which they are charged with administering. Here, the CFPB is not charged with administering the bankruptcy code. Therefore, Freedom’s use of the Form H-30(F) did not insulate it from the requirements of the automatic stay.
Nonetheless, the court found the statements were not an effort to collect on the debt. Though it found no direct precedent, the court analogized the Eleventh Circuit’s interpretation of what constitutes a collection activity under the FDCPA. In Daniels v. Select Portfolio Servicing, Inc., 34 F. 4th 1260 (11th Cir. 2022), the circuit court first noted that a statement’s compliance with TILA did not necessarily make it in compliance with bankruptcy’s section 362. The court went on to set forth four criteria for determining if a statement is an attempt to collect a debt: 1) if the statement contains language to the effect that it is collecting a debt, 2) if the statement requests payment by a certain date, 3) if there is a late fee listed in the statement terms, and 4) if there is history between the parties suggesting that the statement is intended to collect a debt.
Applying those criteria to the case before it, the court found the statements explicitly indicated that they were not intended to collect a debt. The statements instructed the debtors to make their monthly payments to the trustee if required by the bankruptcy plan. To the extent the inclusion of payment coupons with the statements could suggest an attempt to collect, the court found the language to the contrary in the body of the statement overrode that suggestion.
Though the statements included payment dates, they specifically listed $0 as the late fee throughout the entire bankruptcy proceeding.
As to the fourth element, the court found that because Freedom took over the mortgage after the debtors filed for bankruptcy, there was no history to create expectations. Therefore, the fourth element was neutral.
Based on these findings, the court found the statements were not an attempt to collect a debt in violation of the automatic stay. The court cautioned that had the statements included a late fee, that, in combination with the incorrect amount due, might have led to affirmation of the bankruptcy court’s finding.
The court reversed.
Extension of Stay Applies to Creditor Who Was Not Served with Motion
The bankruptcy court properly exercised its discretion to grant an extension of stay in the debtor’s second chapter 11 case where the case was filed in good faith as to the creditors to be stayed even though one of the creditors to which the stay applied was not served with the motion. FourWs, LLC. V. Miller, No. 21-1273 (E.D. Cal. Jan 30, 2023).
The debtor filed chapter 11 bankruptcy in 2019, but the case was dismissed two months later after his counsel missed deadlines and otherwise failed to represent him adequately. Less than one year later, he filed a new, pro se, chapter 11 case. Three days after filing the second case, the debtor moved for an extension of the automatic stay under section 362(c)(3)(B). He was unaware of FourWs as a potential creditor and did not serve them with the motion. The court held a hearing and granted the motion to extend the stay.
FourWs then learned of the bankruptcy and filed a proof of claim. It also sued the debtor in state court on the promissory note. A month later, the trustee moved to dismiss the debtor’s case as having been filed in bad faith. The bankruptcy court granted the trustee’s motion. The state court dismissed FourWs motion, and FourWs moved to reopen the bankruptcy case seeking a ruling that the automatic stay expired as to them 30 days after the debtor filed his bankruptcy petition. The bankruptcy court denied the motion, and FourWs appealed to the district court.
Section 362(c)(3)(B) provides that on a motion by a party in interest, and “upon notice and a hearing,” the bankruptcy court has broad discretion to extend the stay so long as “the filing of the later case is in good faith as to the creditors to be stayed.” The debtor must move for the extension and the hearing must be held within 30 days of the bankruptcy petition. In Morris v. Peralta (In re Peralta), 317 B.R. 381, 389 (B.A.P. 9th Cir. 2004), the Peralta panel emphasized that, once granted, the extension applies to unknown creditors regardless of notice.
The district court here found that, under section 102(1) the “notice and hearing” requirement means notice and hearing that are “appropriate in the particular circumstances.” Because of the 30-day time limit for dealing with motions to extend stay, the bankruptcy court must act quickly. The court observed that “Miller gave two weeks’ notice to creditors of the hearing, filed proof of service within three days of filing his petition, and appeared to be acting in good faith.” It found that the bankruptcy court reasonably concluded that the notice and hearing were appropriate.
The court found two cases cited by FourWs were distinguishable on their facts. In In re Bronson, No. 09-46592, 2010 WL 9485976, at *1 (Bankr. E.D. Cal. Jan. 4, 2010), the debtor noticed creditors by regular mail only a few days before the hearing, and in In re Collins, 334 B.R. 655, 656 (Bankr. D. Minn. 2005), the debtor served notice on the interim trustee but did not serve the creditors. The court here found that the bankruptcy court gave appropriate consideration to the due process rights of the creditors. Finally, the court noted that FourWs had the option to move for relief from stay under section 362(d) or (f) if there was a reason the stay should not be applied to them.
The court affirmed.
Wells Fargo and False Loan Forbearance Class Action
The court denied a motion to dismiss the debtors’ class action adversary complaint against Wells Fargo based on Wells Fargo’s inaccurate notices to various bankruptcy courts that the debtors’ loans had been placed in COVID forbearance at the debtors’ request. Harlow v. Wells Fargo & Co., No. 17-71487, Adv. Proc. No. 20-7028 (Bankr. W.D. Dec. 12, 2022). [Read more…] about Wells Fargo and False Loan Forbearance Class Action
Tribal Sovereign Immunity Waived
In a succinct opinion, the Ninth Circuit reaffirmed its 2004 decision that Congress abrogated tribal sovereign immunity with respect to the automatic stay. Numa Corp. v. Diven, No. 22-15298 (9th Cir. Nov. 14, 2022) (unpublished).
NCBRC and NACBA filed an amici brief in support of the debtor in this case. [Read more…] about Tribal Sovereign Immunity Waived
DCS Properly Sought to Collect Child Support after Settlement
The Oregon Division of Child Services did not violate the automatic stay or the terms of the confirmation order when it engaged in collection activities where the efforts related to a time not covered by the debtor’s settlement agreement with his ex-wife forgiving all child support payments predating the adoption of their child. In re Bronson, No. 20-30704 (Bankr. D. Ore. Aug. 23, 2022). [Read more…] about DCS Properly Sought to Collect Child Support after Settlement
Numa Corp. v. Diven, No. 22-15298 (9th Cir.)
Type: Amicus
Date: July 25, 2022
Description: Sanctions for continuation of tribal case despite automatic stay.
Result: Judgment affirmed, November 22, 2022.
$5 Million Domestic Support Debt and Offshore Trust
The bankruptcy court was not bound by the state court’s finding that the debtor’s ex-wife did not violate the stay when she had the debtor arrested for failure to pay domestic support out of an offshore trust he claimed no ownership interest in, but the court found the issues more appropriate for summary judgment and granted the debtor’s motion to vacate its earlier order of dismissal. Foufas v. Foufas, No. 20-22967, Adv. Proc. No. 22-1013 (Bankr. S.D. Fla. June 17, 2022). [Read more…] about $5 Million Domestic Support Debt and Offshore Trust