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.