The Supreme Court declined cert. in Davis v. Tyson Prepared Foods, No. 18-941 (May 20, 2019), a case out of the Tenth Circuit presenting the issue of whether section 362(a) applies when a creditor passively holds or obtains an interest in property of the debtor or the estate. The case involved a lien that arose automatically out of post-petition Worker’s Compensation payments made to the debtor. The trustee sought to avoid the lien as violating the automatic stay. The Tenth Circuit found that based on WD Equip., LLC v. Cowen (In re: Cowen), 849 F.3d 943 (10th Cir. 2017), section 362(a)(4), which prohibits “any act to create, perfect, or enforce any lien,” requires affirmative conduct on the part of the creditor. Here, because the lien was created by operation of law, there was no such affirmative conduct and the Tenth Circuit found no stay violation.
Withholding Graduation Date from Transcript Violates Stay
Excluding the graduation date from the debtor’s transcript was tantamount to withholding the transcript altogether and constituted a violation of the automatic stay for which the debtor was entitled to damages, even though those damages consisted only of the costs associated with vindicating her rights. California Coast Univ. v. Aleckna, No. 16-158 (M.D. Pa. Aug. 28, 2019).
At the time the Chapter 13 debtor completed her coursework at California Coast University, she owed $6,300 in overdue tuition. When she and her husband filed for bankruptcy she listed the tuition debt as unsecured and disputed. She later sought an official copy of her transcript. CCU provided a transcript that omitted the graduation date, explaining that, because of the outstanding debt, she had not officially graduated. CCU filed an action in the bankruptcy case seeking a finding that the tuition debt was non-dischargeable. Ms. Aleckna counterclaimed that CCU’s refusal to provide her complete transcript violated the automatic stay. The bankruptcy court found in favor of Ms. Aleckna and awarded damages for lost $230.16 wages, and unspecified attorney’s fees and costs.
[Read more…] about Withholding Graduation Date from Transcript Violates StayCity Did Not Violate Stay by Failing to Rescind Warrant
The 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).
7th Circuit Rules Chicago Can Not Ignore the Automatic Stay and Hold Vehicles Until Tickets are Paid
On June 19, 2019 the 7th Circuit Court of Appeals affirmed the decisions of the lower bankruptcy courts.
In four Chapter 13 bankruptcies, the City of Chicago impounded vehicles owned by the Debtors for failure to pay multiple traffic fines. After the Debtors filed chapter 13, the City refused to return the vehicles claiming they needed to maintain possession to continue their perfection on them and wouldn’t return the vehicles until the fines were paid.
The bankruptcy courts held that the City violated the automatic stay by exercising control over the vehicles, that no exceptions applied, and ordered the return of the vehicles and sanctions. The City appealed and the 7th Circuit consolidated the appeals in this case.
The Debtors were represented in part by NACBA members John Wonais of the Semrad Law Firm, and Eugene Wedoff. NACBA member Tara Twomey supported the Debtors by filing an amici curiae brief for NACBA and the National Consumer Bankruptcy Rights Center. NACBA member David Yen filed an amicus curiae brief for the Legal Assistance Foundation.
To read more click here.
Bankruptcy Court Addresses Eligibility, Non-formal Notice of Bankruptcy and a Creditor’s Affirmative Duty to Correct Technical Violations of the Automatic Stay
A bankruptcy court recently ruled on several issues of importance to all potential debtors. First, the court examined the effect of a prior dismissal order (for failure to timely file certain schedules, statements or other documents) on a subsequent bankruptcy petition. Specifically, the court examined the small slice of cases where the automatic stay does not apply in a second case when the Debtor is not an “eligible Debtor” under 11 U.S.C. § 109(g). The court also examined the split in authority on who bears the burden of proof of proving eligibility.
Further the court examined whether a creditor, who unknowingly completed a foreclosure sale during the second case, violated the automatic stay by not promptly undoing the sale upon notification of the bankruptcy. Further the court extensively discussed the different non-traditional methods that creditors can receive binding notice of a bankruptcy and their responsibility thereafter. The court also examined whether a technical violation can turn into a willful violation and whether a creditor has an affirmative duty to correct a technical violation.
To read more click here.
Serial Filings and the Automatic Stay
Under section 362(c)(3), the automatic stay terminates in its entirety after 30 days, when the debtor has had a previous case dismissed within one year of filing the second case. Smith v. State of Maine Bureau of Rev. Servs., 910 F.3d 576 (1st Cir. 2018). [Read more…] about Serial Filings and the Automatic Stay
Automatic Stay Does Not Require Return of Repossessed Property
A New Jersey District Court applied the minority view that a creditor does not have an affirmative duty to return a vehicle repossessed pre-petition upon learning of the debtor’s bankruptcy filing. Denby-Peterson v. Nu2u Auto World, No. 17-9985 (D. N.J. Nov. 1, 2018).
Joy Denby-Peterson entered into a purchase money security agreement for the purchase of her 2008 Corvette. The original seller transferred the debt to Nu2u. When Ms. Denby-Peterson failed to make payments according to the agreement, Nu2u repossessed the vehicle. Ms. Denby-Peterson filed for chapter 13 bankruptcy and initiated an adversary proceeding seeking turnover of the vehicle and actual damages for violation of the automatic stay. The bankruptcy court ordered return of the vehicle, but denied Ms. Denby-Peterson’s motion for sanctions. [Read more…] about Automatic Stay Does Not Require Return of Repossessed Property
Failure of Evidence Sinks Motion for Relief from Stay
Where the evidence showed assignment of the mortgage to U.S. Bank, but did not show that the underlying promissory note was likewise assigned, U.S. Bank was not a party-in-interest in the debtor’s chapter 7 bankruptcy and its servicer was not entitled to relief from stay. In re Garcia, No. 18-10229, 2018 Bankr. LEXIS 1352 (Bankr. S.D. N.Y. May 8, 2018).
In this case, Bankruptcy Judge Martin Glenn bemoaned the sloppy work of both Miguel Garcia’s chapter 7 counsel and the counsel for U.S. Bank’s servicer, Rushmore Loan Management Services (Rushmore). But it was Rushmore’s failure to include sufficient evidence in its motion that ruled the day. [Read more…] about Failure of Evidence Sinks Motion for Relief from Stay
Booting Car Not a Stay Violation
The City’s action in booting the debtor’s car after she had filed her bankruptcy petition did not violate the automatic stay where its purpose was to protect public safety. In re Hicks, No. 17-3663 (Bankr. N.D. Ill. Feb. 1, 2018).
Ashina Hicks entered chapter 13 bankruptcy with almost $16,000 in traffic fines owed to the City of Chicago. After her petition, the City booted her car and did not remove the boot until the following day. Ms. Hicks filed a motion to show cause why the City’s action should not be found to be a violation of the automatic stay, and she sought $6,000 in damages for emotional distress, inconvenience and embarrassment. The City countered that its action was within its governmental power to protect the public safety and was not subject to the automatic stay under section 362(b)(4). The court agreed. [Read more…] about Booting Car Not a Stay Violation
Stay Does Not Require Bank to Release Citation Lien
Reasoning that the case involved a lien rather than an administrative freeze on funds in a bank account, the bankruptcy court found that the automatic stay did not require the bank to take affirmative steps to release its citation lien. In re Smiley, No. 17-27169 (Bankr. N.D. Ill. Jan 11, 2018).
J.P. Morgan Chase Bank froze the bank accounts belonging to chapter 13 debtor, Kim Smiley, pursuant to a citation to discover assets filed by Bank of America. Under Illinois law, the citation created a lien on Ms. Smiley’s accounts. After Ms. Smiley filed her bankruptcy petition, Bank of America refused to release the lien and unfreeze the funds. Ms. Smiley sought sanctions for violation of the automatic stay under section 362(k). [Read more…] about Stay Does Not Require Bank to Release Citation Lien