Tag Archives: Automatic Stay

Is A Car Loan Company Violating The Automatic Stay If They Disable My Car While I Am In Bankruptcy?

By Ryan C. Wood

Do you know anyone that has a disabling device in his or her car or do you yourself have a disabling device in your car? These devices are showing up in more and more states. The disabling device is installed in your car when you purchase a car, most likely at dealerships that act as the finance company as well. The dealerships normally install these devices on buyers who have low credit scores to protect the dealership/lender’s investment. These disabling devices act as an anti-theft device but also have GPS capabilities. What normally happens is that the consumers who purchase the car will have to pay on time each month to get a code from the lender. This code will allow the buyers to keep the car running another month. If the buyer misses a payment the lender will disable the device and the buyer will not be able to start the car and the GPS will provide the lender with the location of where to pick up the car to repossess it. This sounds incredibly dangerous. What if you were driving in the middle of the freeway and your car is disabled? If you have one of these devices on your car you need to know what your rights are after you file for bankruptcy.

In the case of In re Hampton (Hampton v. Yam’s Choice Plus Autos, Inc.), 319 B.R. 163 (Bankr. E. D. Ark. 2005), Toni Hampton purchased a car from Yam’s Choice Plus Autos, Inc. (“Yam’s”). There was a PayTeck device installed on the car. Ms. Hampton thought that it was only an anti-theft device and only learned that she would need a new code to start the car each month after she made her first payment. She made her payments on time and had no issues with her car. She filed for Chapter 13 bankruptcy protection on October 8, 2002. Ms. Hampton’s Chapter 13 plan included payments to the lender for her car. Her plan was confirmed and she made her Chapter 13 payments on time. After she filed for bankruptcy Ms. Hampton indicated she was barely able to get her car working for more than 2 weeks at a time. In the beginning, her bankruptcy lawyer’s employee tried to call Yam’s to get the correct codes. Yam’s indicated Ms. Hampton would need to call in to get the code. Ms. Hampton called in every month to get the code but most of the codes were incorrect and her car was shut off. It made her constantly late for work and there were times when she had to get rides from co-workers and friends and family because her car just would not start. Yam’s was aware of the issues but did nothing to help Ms. Hampton. The bankruptcy court in this case concluded that Yam’s violated the automatic stay. Under 11 U.S.C. §362(a)(3) filing bankruptcy acts as a stay of “any act… to exercise control over property of the estate…” Installing a device in a car which prevents the bankruptcy filer from starting the car is an exercise of control over the estate property which violates the automatic stay. The court awarded Ms. Hampton damages she incurred during this period but did not award punitive damages. The court clarified that while Yam’s violated the automatic stay in this situation, the existence of the disabling device would not in itself violate the automatic stay if Yam had taken proper precautions and provided Ms. Hampton with the correct codes every month. If there were issues with the device itself, Yam’s should have fixed it.

In a similar case, In re Crawford (Crawford v. Credit Acceptance Corporation), 2008 WL5427713 (Bankr. S.D. Ill. December 2008), Ms. Crawford’s finance company repossessed her car. She filed for Chapter 13 bankruptcy and the car was returned to her but she started having problems with her car immediately after because of the malfunction of the disabling device on her car. She sued the finance company for violation of the automatic stay for not repairing the disabling device and the courts agreed with her. The court held that the finance company violated the automatic stay because they failed to ensure the car “operated free from any interference from the disabling device.”

So the bottom line is this: you have the right to drive your car free from worry that it will stop at any time and to also drive your car without having to worry that your car will not start so long as you continue making your payments on time either on your own or through your Chapter 13 plan. If your lender deliberately provides you with the wrong start codes or does not help you if there is a malfunction of the disabling device they are violating the automatic stay and your bankruptcy lawyer will be able to file a motion or adversary proceeding for violating the automatic stay.

Damages for the Willful Violation of Automatic Stay

By Ryan C. Wood

The general rule is that once you file for bankruptcy protection you are free from creditor harassment and collection activity. This is because once you file bankruptcy there is the automatic stay. This automatic stay stops all collection activity including creditor calls, letters, wage garnishments, levies, and/or continuation or start of any lawsuit in an attempt to collect a debt. There are some exceptions to the automatic stay as listed in Section 362 of the Bankruptcy Code. So before threatening a creditor with sanctions make sure one of the exceptions does not apply. The automatic stay is one of the most powerful tools in the bankruptcy arsenal. But what happens if creditors ignore the automatic stay and continue to try to harass you and attempt to collect a debt from you anyway? What rights do you have?

This is what happened in In The Matter of Rupanjali Snowden (No. 13-35291, 9th Circuit Court of Appeals, September 2014). In this case, Ms. Snowden, the bankruptcy filer, took out a payday loan from Check Into Cash of Washington (“CIC”) in the amount of $575. She was unable to make the payment and advised CIC that she was thinking of filing for bankruptcy and provided her bankruptcy attorney’s contact information to them. Despite having this information, CIC would constantly contact Ms. Snowden at work (she is employed as a nurse at a hospital). Every time she heard her name over the intercom she thought she was being called regarding an emergency with her daughter and she became very stressed out. CIC is the original creditor and may contact someone at work, but they cannot harass her. If CIC was a collection agency Ms. Snowden may have a claim under the Fair Debt Collections Practices Act.

Ms. Snowden filed for bankruptcy protection shortly after with a Chapter 7 bankruptcy lawyer. CIC was listed as a general unsecured creditor in the bankruptcy petition. A little over a month after her bankruptcy filing, CIC cashed her post-dated check causing Ms. Snowden’s bank account to become overdrawn and charged additional bank fees as well. Ms. Snowden became panicked and was crying and feeling miserable. Her good bankruptcy lawyer filed a motion for sanctions against CIC for violation of the automatic stay, seeking return of the funds, overdraft fees, emotional distress, punitive damages and attorney fees. CIC disputed the fact that they violated the automatic stay. Ms. Snowden offered to settle the case for $25,000 which CIC rejected. CIC proposed to pay her $1,445, which Ms. Snowden rejected. The bankruptcy court found that CIC willfully violated the automatic stay and awarded Ms. Snowden $12,000 for emotional distress, $12,000 in punitive damages, $575 for the loan amount, $370 in bank fees, and $2,538.55 in attorney fees, totaling $27,483.55. CIC appealed the case to the district court. The district court remanded the case back to the bankruptcy court to determine emotional distress damages and reevaluate punitive damages based on change in the emotional distress damages. The bankruptcy court did not change its judgment after reconsideration. CIC appealed the case again and Ms. Snowden cross-appealed.

The Ninth Circuit upheld Ms. Snowden’s emotional distress award and punitive damages. The court also rejected CIC’s argument that the attorney fees stopped accruing once CIC offered to settle the case with Ms. Snowden for $1,445. The court indicated that CIC never admitted to the violation of the automatic stay and therefore the stay was not cured. The court determined the proper date the violation of the automatic stay ended on December 10, 2009 when the bankruptcy court determined that the automatic stay was violated. Of course, Ms. Snowden would not receive all of the attorney fees up to that date. She would only receive the fees that are related to curing the stay violation itself. Since some of the attorney fees were related to recovering damages, those attorneys’ fees would be disallowed.

This case provides a guideline of what damages can be obtained when there is a willful violation of the automatic stay. As with each case, however, the rulings are heavily dependent on the specific circumstances of each case. You have to provide facts to prove you are eligible for actual damages, emotion distress damages, punitive damages, attorney fees and other damages.

What is “Cause” to Lift the Automatic Stay in my Bankruptcy Case?

By Ryan C. Wood

There are many reasons people may want to file for bankruptcy: stopping a pending foreclosure, stopping a wage garnishment, stopping a lawsuit, or trying to get out from all their crushing debts to obtain a fresh start to name just a few. There are many more reasons than these as to why people file for bankruptcy. There is one powerful tool in the bankruptcy arsenal that accomplishes all of the actions named above: the automatic stay. The automatic stay is what stops a creditor from collecting from you, contacting you, continuing lawsuits or wage garnishments against you. The automatic stay freezes all collection activity against you as soon as your bankruptcy lawyer files your petition for bankruptcy relief. Obviously your creditors are not the biggest fan of the automatic stay if they are trying to collect from you. Their objective is to lift the automatic stay so they can continue their collection activity. How do they get the automatic stay lifted as to their debt?

Under 11 U.S.C. §362(d)(1) of the Bankruptcy Code, one of the ways in which a creditor can obtain a relief from stay order from the bankruptcy court is “for cause, including the lack of adequate protection of an interest in property…” What is considered “cause” for the judge to grant relief from stay to the creditor? It would be easier if Congress set out an exact definition on what is considered “cause” to lift the automatic stay, but since Congress did not do that, “cause” is determined on a case-by-case basis. See Delaney-Morin v. Day (In re Delaney-Morin), 304 B.R. 365, 369 (9th Cir. BAP 2003). Everything depends on the circumstances. The party seeking to preserve the automatic stay has the burden of proof. See Ellis v. Parr (In re Ellis), 60 B.R. 432, 435 (9th Cir. BAP 1985).

One of the circumstances that judges grant relief from stay for “cause” is the lack of proof of current insurance on the property. Proof of insurance is normally under the terms of a deed of trust. Failure to maintain insurance is cause to lift the automatic stay because it does not provide the creditor with adequate protection of its collateral. If anything happens to the property there would be a huge decline in property value and the creditor would lose its investment if no insurance is available to insure the property.

Another circumstance that judges lift the automatic stay for “cause” is lack of post-petition payments to the secured creditor. Your pre-petition arrears may be paid through a Chapter 13 bankruptcy plan your bankruptcy attorney drafts and files, but your post-petition payments need to be paid to your creditor once the bankruptcy case is filed. Lack of payment means that your creditor is not adequately protected against a default and they can have the stay lifted so they can continue with foreclosure proceedings to get the property back.

Most of the relief from stay actions are normally filed by secured creditors because they have an interest in the collateral (your car, your house, etc.). You do not have to worry about your unsecured creditors filing motions for relief from stay actions against you for your credit card debts or personal loans as these creditors do not have any cause to lift the automatic stay. One exception is your landlord. If you owe money to your landlord, your landlord may file a motion to lift the automatic stay against you to continue their unlawful detainer action if you are not paying rent to them. Another reason a motion to lift the automatic stay may be filed is to continue a lawsuit in another jurisdiction (for example, a state court) for actions not related to collection of debt. This could be filed by either you or your creditor.

If you have a motion for relief from stay action filed against you, it is highly advisable to seek the advice of an experienced attorney. Since the ability to obtain a relief from stay order from the judge is on a case-by-case basis, you should consult with a lawyer to see if your property may be in jeopardy.