§ 62.5     Remedies for Violation of Stay
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 62.5, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

The “automatic” stay is so named because it prohibits the actions described in § 362(a) without regard to whether the actors have notice or knowledge of the bankruptcy petition. A technical violation occurs when a creditor has no notice or knowledge of the Chapter 13 case but takes an action prohibited by § 362(a). If the violation of the stay is without notice or knowledge of the filing, most bankruptcy courts are reluctant to impose sanctions other than to require the undoing of whatever occurred in violation of the stay.1 A few courts have awarded compensatory damages and even attorneys’ fees for relatively technical violations of the stay.2 If the creditor has knowingly violated the stay or exhibits a pattern of misbehavior or refuses to voluntarily repair the injury done in violation of the stay, most courts don’t hesitate to impose sanctions, especially if the debtor’s property or ability to carry out the plan is impaired.

[2]

A “willful” violation of the stay subjects the offending creditor to the sanctions in 11 U.S.C. § 362(h). If the violation of the stay is willful, the statutory remedy is recovery of “actual damages, including costs and attorney’s fees and, in appropriate circumstances . . . punitive damages.”3 Although it has been said that an award of damages is mandatory once the bankruptcy court finds a willful violation of the stay,4 there are reported decisions finding willful violations of the stay in which damages were not awarded.5

[3]

The U.S. Court of Appeals for the Ninth Circuit has described the test for a willful violation of the automatic stay as follows:

A “willful violation” does not require a specific intent to violate the automatic stay. Rather, the statute provides for damages upon a finding that the defendant knew of the automatic stay and that the defendant’s actions which violated the stay were intentional. Whether the party believes in good faith that it had a right to the property is not relevant to whether the act was “willful” or whether compensation must be awarded.6
[4]

A willful violation of the stay is sometimes found when the debtor makes a postpetition demand on a creditor, and the creditor, with obvious knowledge of the bankruptcy case, acts adversely to the debtor. For example, it has been held to be a willful violation of the stay for a creditor to refuse to turn over property of the estate after demand by the debtor.7 The creditor that proceeds with collection after being warned of the Chapter 13 case willfully violates the stay and faces sanctions and damages.8 That the creditor believes that the debtor is improperly in a Chapter 13 case—for example, when the creditor believes that the debtor is not eligible for Chapter 13—is not a defense to a willful violation of the automatic stay.9 It has been held that good-faith reliance on the advice of counsel is not a defense to a finding of willfulness.10

[5]

In contrast to many of the cases discussed above, the U.S. District Court for the Western District of North Carolina concluded that a “clerical error” is not willful for purposes of the automatic stay and § 362(h). In Hamrick v. United States (In re Hamrick),11 the Chapter 13 debtor scheduled the United States of America, Defense Finance and Accounting Service, as a creditor, and the United States filed a proof of claim. Nonetheless, the United States sent the debtor a demand for payment. Debtor’s counsel sent the United States a written warning that sanctions would be sought unless the demand was withdrawn. The United States withdrew the demand and gave the debtor a written apology. A plan was confirmed, and a copy of the plan was sent to the United States.

[6]

Approximately one year later, the United States sent another letter to the debtor, demanding payment. “‘A clerk who was unfamiliar with the procedure for bankruptcy . . . did not disable the automatic letter feature.’ . . . This caused the computer to generate a ‘dunning’ letter to the Debtors. . . . [T]his demand was sent by an employee who had not been trained in bankruptcy proceedings, who was unaware that the Debtors had filed bankruptcy and who did not recognize the bankruptcy code on the computer system.”12

[7]

This second incident prompted the debtor to seek sanctions for willful violation of the automatic stay. The bankruptcy court found that the United States had violated the automatic stay and ordered monetary sanctions. The district court reversed, reasoning as follows:

[T]he statute only punishes a “willful violation” of the automatic stay. . . . The Fourth Circuit has stated that the conduct of a creditor in violating the stay is willful when “there is ample evidence in the record to support the conclusion that [the creditor] knew of the pending petition and intentionally attempted to [continue collection procedures] in spite of it.” [Budget Serv. Co. v. Better Homes of Va., Inc., 804 F.2d 289 (4th Cir. 1986)]. Thus, in order for conduct to be willful, it must be intentional or deliberate. . . . “Willful” is a word “of many meanings, its construction often influenced by its context.” There is no legislative history on what Congress intended “willful” to mean in the context of § 362(h). The courts have generally interpreted it to require “intentional or deliberate” conduct. . . . In the instant case, the debtors’ account was changed to a suspended status when the bankruptcy notice was received. . . . A bankruptcy code was placed on the account in the computer to prevent demand letters from being generated. . . . When bankruptcy plan payments were received for the account, a computer code allowed the account to be opened to credit the payment, but the account was disabled by a code from generating a demand notice. The reason a demand notice was generated on the occasion in question was because a new employee had been assigned to the “work unit code and had not been correctly trained.” . . . Thus when the clerk applied the payment to the account, he did not recognize the bankruptcy code, failed to override the system, and the notice was generated. The circumstances presented here amount to nothing more than “innocent clerical error.” The [government] had in place a mechanism to prevent the generation of demand notices which would have prevented the notice but for the innocent mistake of a new employee. Nor does the court find that the mere failure to correctly train this employee amounts to “reckless disregard” of the stay. This incident was an isolated event . . . which occurred over one year after the initial demands were generated. . . . In reaching this conclusion, the court relies on the commonly accepted definitions of the terms “deliberate” and “intentional.” . . . Debtors argue that the act was intentional, because the clerk, failing to recognize the bankruptcy code on the account, intended the demand notice to be mailed. Nonetheless, the bankruptcy court has construed “willful” as used in the Code to mean an intentional or deliberate act done with knowledge that the act is in violation of the stay. . . . To accept debtors’ argument would be to impose a form of strict liability on creditors, which in today’s computer controlled financial world would amount to nothing less than a windfall for debtors’ attorneys where no true injury results. . . . The statute prescribes a sanction only when the debtor is (1) injured and (2) by a willful violation. . . . The record contains no evidence that the debtors were in any manner injured or even bothered by this demand notice. It does not appear that the case law obligates the definition of “willful” to include innocent clerical error. This violation was “inadvertent” and not willful, intentional or deliberate. Moreover, no injury has been shown.13
[8]

The district court in Hamrick used a different definition of willful than that used by the U.S. Court of Appeals for the Ninth Circuit in Tsafaroff v. Taylor (In re Taylor),14 quoted above. It cannot be said that the United States was unaware of the Chapter 13 filing or unaware of the automatic stay in Hamrick. The violation of the stay in Hamrick was willful under the Ninth Circuit’s definition, and the United States escapes that conclusion only because the Hamrick court required that the intentional or deliberate act must be to violate the automatic stay.

[9]

This difference in interpretation is analogous to the debate over the meaning of “willful and malicious” for purposes of nondischargeability under § 523(a)(6) of the Code prior to the Supreme Court’s decision in Kawaauhau v. Geiger.15 If it must be shown that a creditor actually intended to violate the automatic stay to find a willful violation under § 362(h), then most of the reported cases finding willful violations of the stay are wrongly decided. The Ninth Circuit’s view of willfulness is the majority view. Hamrick requires a more stringent finding of actual intent to violate the stay.

[10]

Careful application of the majority definition of willful is illustrated in In re Steenstra.16 The debtor in Steenstra was in contempt of state court orders to pay child support. The Massachusetts Department of Revenue interceded on behalf of the debtor’s ex-spouse. The debtor retreated into a Chapter 13 case. The Department had notice of the filing.

[11]

An attorney for the Department, based on a misunderstanding of property of the estate in a Chapter 13 case,17 wrote the debtor’s employer, requesting a wage assignment. One month later, the Chapter 13 case was dismissed. A few weeks later, on the debtor’s motion, the Chapter 13 case was reinstated. The Department learned of the dismissal but was not aware of the reinstatement. The Department caused an arrest warrant to be issued. The debtor was arrested and spent a night in jail. The debtor sought sanctions for the wage assignment request and the arrest warrant.

[12]

With respect to the letter seeking a wage assignment, the bankruptcy court found willfulness for § 362(h) purposes:

[T]he . . . Letter to [the debtor’s employer] seeking institution of a wage assignment was sent . . . at time when Ms. Fennell [Counsel for the Massachusetts Department of Revenue] knew the bankruptcy case (and the automatic stay) was extant. . . . Ms. Fennell . . . firmly believed . . . that sending a letter for the purpose of collecting a postpetition debt, was not a violation of the automatic stay. However, “a good faith belief in a right to property is not relevant to a determination of whether the violation was willful.” . . . All that is required is knowledge of the existence of the stay and an intent to commit the act which violated the stay.18

But the arrest warrant required a different outcome because the Department’s counsel believed the Chapter 13 case was dismissed at the time the warrant was requested:

The [warrant requests] which led to the Debtor’s arrest, present a different picture . . . . Ms. Fennell did not become aware of the reinstatement [of the Debtor’s Chapter 13 case] until . . . long after the . . . reissuance of the capias which led to the Debtor’s arrest. As a result, the Debtor has failed to demonstrate Ms. Fennell’s actual knowledge of the existence of the automatic stay. . . . Ms. Fennell’s actions, with respect to the [arrest warrant] were not willful within the meaning of § 362(h).19
[13]

Contrast Steenstra with Soto v. Lanoue (In re Soto).20 In Soto, the debtor leased a trailer from his brother-in-law (first mistake). The debtor filed a Chapter 13 case and did not list the brother-in-law as a creditor (second mistake). However, 10 days after the petition, the debtor amended the schedules and gave notice to the brother-in-law that he had been added as a creditor.

[14]

Three months after the petition, the brother-in-law went to the local police department to recover the trailer from the debtor; with the threat of arrest, the brother-in-law recovered the trailer. The debtor sought sanctions for a willful violation of the automatic stay.

[15]

The bankruptcy court found that the brother-in-law improperly used criminal process to recover possession of estate property but that this violation of the stay was not willful based on the following notion of willfulness:

The Court finds that the Defendant did not have notice of the stay when he went to the police department. The [debtor] amended his schedules to add the Defendant as a creditor . . . . However, the . . . Defendant was not served with a Notice of § 341 Meeting of Creditors, which contained all the relevant information for creditors about the automatic stay. The Notice of Amendment of Schedules and the Notice to Added Creditor served on the Defendant did not have information about the automatic stay. . . . [The debtor] failed to demonstrate the Defendant’s actual knowledge of the existence of the automatic stay. Accordingly, the Court rules that the Defendant’s action was not willful within the meaning of section 362(h).21
[16]

Steenstra focused the § 363(h) willfulness inquiry on the creditor’s notice and knowledge of the Chapter 13 filing. Hamrick and Soto shift that focus to the creditor’s state of mind with respect to the automatic stay itself. There was no question in either Hamrick or Soto that the creditor had actual knowledge of the Chapter 13 case when the acts violating the automatic stay were performed. But the district court in Hamrick and the bankruptcy court in Soto required the debtors to prove more than knowledge of the bankruptcy case and acts in violation of the stay for § 362(h) purposes. Soto rewards empty-headedness as a defense to willful violation of the stay. Soto puts an impossible burden on debtors to go beyond notice of the bankruptcy filing to educate creditors about the automatic stay. Steenstra more appropriately respects the importance of the stay as a fundamental protection of debtors by assigning to creditors the risks of ignorance and lack of caution once there is knowledge of a Chapter13 case.

[17]

Before commencing an action to remedy a violation of the stay, debtor’s counsel should contact the creditor and seek a consensual solution.22 If the creditor agrees to undo the action taken in violation of the stay—for example, to dismiss a lawsuit filed in violation of the stay, to return monies garnished in violation of the stay, to reverse a transfer recorded in violation of the stay—that informal resolution is usually in the best interests of the debtor. Although it has been held that there is no duty for the debtor to mitigate damages when there has been a willful violation of the automatic stay,23 failing to contact the creditor or creditor’s counsel to prevent or stop the stay violation is often mentioned by bankruptcy courts as a factor bearing on the measure of damages. One reported decision declared void a foreclosure sale held the day after the Chapter 13 petition but ordered the debtor’s counsel to pay costs and expenses associated with the foreclosure because counsel “caused harm” to the creditor by “failing to notify it of the bankruptcy filing before the scheduled foreclosure sale.”24 This same court, in another Chapter 13 case, found that a creditor violated the automatic stay by removing a state court collection action to federal district court, but no damages were awarded because the debtor did not immediately raise the automatic stay as a defense.25 A “vexatious” motion for sanctions when an “innocent clerical error” resulted in two postpetition contacts with the debtor warranted an award of attorney fees against debtor’s counsel: “[C]ounsel’s efforts were designed as much to mine fees out of this situation as [they were] to solve the problem for the debtor.”26

[18]

The message for debtors is this: the automatic stay is a potent shield that must be respected by creditors; it is not a stealth bomber. Court action is warranted when the creditor acted in knowing violation of the stay, exhibits a pattern of behavior that is contemptuous of the stay or refuses to undo the injury.27

[19]

Although there is disagreement among the courts whether an action in violation of the automatic stay is “void” or “voidable,”28 if court action becomes necessary, one remedy that debtor’s counsel should request is that whatever was done in violation of the stay should be undone. For example, the U.S. Court of Appeals for the Third Circuit has held that the continuation of a conversion action against a Chapter 13 debtor in a U.S. district court was “void ab initio” and “the district court must vacate its orders.”29 The U.S. Court of Appeals for the Sixth Circuit held that the sale of repossessed collateral after the filing of a Chapter 13 petition was “void” and the creditor must return the proceeds of the sale to the Chapter 13 estate.30 Several courts have held that an action in violation of the stay is void even if the creditor was without notice of the Chapter 13 filing.31

[20]

Punitive damages can be awarded “in appropriate circumstances” under § 362(h). It has been said that a willful violation of the stay will justify punitive damages when there is evidence that the creditor’s actions were “egregious, vindictive, malicious, or accompanied by bad faith.”32 Willful violations of the stay that go on and on—when the creditor repeatedly refuses to return estate property or to undo an unambiguous violation of the stay—are the fact patterns most likely to inspire punitive damages awards under § 362(h).33 Some courts have held that punitive damages can be awarded for a willful violation of the stay under § 362(h) even when the debtor has suffered no compensatory harm.34 Although not always differentiated as compensatory or punitive damages, when the court finds a violation of the stay to be egregious, significant damages—including lost wages, rental cars, medical expenses, lost value and attorneys’ fees—have been awarded.35

[21]

A few courts have indicated that, with the right proof, emotional distress can be an element of damages for a willful violation of the automatic stay.36 Some courts require supporting medical evidence37 or other corroborating proof of emotional distress in addition to the debtor’s testimony.38 In some circuits, an award of emotional distress damages for violation of the automatic stay requires proof that the debtor also suffered an economic loss to which the emotional injury can attach.39 Attorney’s fees have been awarded for willful violation of the automatic stay even when the debtor proves no other element of damages.40

[22]

Sovereign immunity has often been raised as a defense by the United States and by state governments on the ropes for violating the stay in Chapter 13 cases.41 Prior to 1994, the sovereign immunity battles in Chapter 13 cases mostly focused on the question whether Congress had effectively waived the sovereign immunity of governmental units in § 106 of the Code. In 1994, Congress amended § 106 to clarify the intent to broadly waive sovereign immunity in bankruptcy cases. With respect to the federal government, § 106 waives sovereign immunity to actions for damages (other than punitive damages) for violations of the automatic stay. But with respect to state governments, recent Supreme Court decisions strongly suggest that § 106 is unconstitutional to the extent it purports to waive Eleventh Amendment or sovereign immunity in any action for damages for violating the automatic stay.

[23]

Both before and after the broad waiver of sovereign immunity in the Bankruptcy Reform Act of 1994,42 when the requirements for waiver are not present, sovereign immunity is a defense to sanctions for even a willful violation of the stay by a governmental unit.43 There are a few reported decisions in which governmental units have been ordered to pay damages to a Chapter 13 debtor, notwithstanding a claim of sovereign immunity, based on a finding of waiver under § 106.44 Even when the conditions for waiver of sovereign immunity with respect to monetary damages were not present—for example, when the offending governmental unit did not file a proof of claim—courts have ordered declaratory and injunctive relief.45

[24]

The early reported Chapter 13 cases in which debtors sought damages from a governmental unit for violation of the automatic stay and in which the defense of sovereign immunity was raised struggled to apply Supreme Court interpretations of § 106(a) and (b).46 Prior to amendment in 1994, § 106(a) provided that a governmental unit was deemed to have waived sovereign immunity “with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit’s claim arose.”47 If the conditions for a waiver of sovereign immunity were present, it had been held that the phrase “any claim” in § 106(a) included recovery of damages, including punitive damages, from a governmental unit for a willful violation of the stay under § 362(h).48

[25]

Section 106 was rewritten by § 113 of the Bankruptcy Reform Act of 1994. Section 106(a) now contains a broad statement that “sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to the following: . . .”49 There follows a long list of Code sections, including a specific reference to § 362. As rewritten by the 1994 Act, § 106(a) purports to waive the sovereign immunity of “governmental units”—broadly defined to include the United States; any department, agency, or instrumentality of the United States; a state; a municipality; and so forth.50 After the 1994 Act, there is clear congressional intent to abrogate the sovereign immunity defense to sanctions for violation of the automatic stay under § 362(h).51

[26]

However, the 1994 amendments to § 106 contain an exclusion: courts may issue money judgments against governmental units “but not including an award of punitive damages.”52 This exclusion of punitive damages from the kinds of money recoveries with respect to which sovereign immunity is abrogated overrules the decisions under prior law that rejected sovereign immunity defenses to punitive damages awards under § 362(h) for willful violations of the stay by governmental units.

[27]

Also, the 1994 amendments to § 106 changed the method for calculating awards of costs or fees against a governmental unit that violates the automatic stay. 11 U.S.C. § 106(a)(3) requires that a judgment for costs or fees against a governmental unit “shall be consistent with the provisions and limitations of § 2412(d)(2)(A) of title 28.”53 Section 2412(d)(2)(A) now limits an award of attorneys’ fees to $125 per hour “unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceeding involved, justifies a higher award.”54 In all Chapter 13 cases in which a governmental unit violated the automatic stay and in which an award of attorneys’ fees is appropriate, § 106 waives sovereign immunity only to a maximum fee of $125 per hour unless the bankruptcy court finds one of the exceptional circumstances in 28 U.S.C. § 2412(d)(2)(A).55 In a stay violation proceeding pending against the United States at the enactment of the 1994 Act, the U.S. Court of Appeals for the Seventh Circuit acknowledged the new limits on attorneys’ fees and remanded for recalculation of attorneys’ fees in light of the 1994 amendment.56 One bankruptcy court decision acknowledged the hourly rate limitation in § 106(a)(3) and found that bankruptcy law was “not a specialized area of the law justifying a higher rate”; but the court allowed $250 per hour to debtor’s counsel based on “specialized knowledge of Eleventh Amendment sovereign immunity issues” in stay litigation with the state of Georgia.57

[28]

Notwithstanding the broad waiver of sovereign immunity in § 106 of the Code, when a unit of state government is alleged to have violated the automatic stay, Eleventh Amendment immunity and sovereign immunity are powerful defenses to a Chapter 13 debtor’s action for sanctions. Much has already been written about the Supreme Court’s 1996 discussion of sovereign immunity in Seminole Tribe of Florida v. Florida.58 With the Supreme Court’s June 23, 1999, trilogy,59 it is now more or less clear that the blanket abrogation of sovereign immunity of the states in 11 U.S.C. § 106 will not survive constitutional attack. The many reported cases discussed above validating § 106 as an effective waiver of the Eleventh Amendment or sovereign immunity of states are now suspect or overruled.

[29]

Any Chapter 13 debtor who seeks sanctions for violation of the stay by a state government can expect to first confront an Eleventh Amendment or sovereign immunity defense.60 It is no longer clear what action by a state would be sufficient to waive Eleventh Amendment or sovereign immunity with respect to an action for sanctions for violation of the automatic stay. After the June 23, 1999, Supreme Court trilogy, there is question whether Chapter 13 debtors can resort to state courts to avoid an Eleventh Amendment or sovereign immunity defense to sanctions litigation with a state.61

[30]

Seminole and the June 23 trilogy deal with the Eleventh Amendment immunity or sovereign immunity of states. Congress can and has waived sovereign immunity of the federal government in § 106 of the Bankruptcy Code. Even if § 106 is unconstitutional to the extent it presumes to abrogate the Eleventh Amendment or sovereign immunity of a state in bankruptcy matters, § 106 remains constitutional as a waiver of sovereign immunity in actions against federal governmental units for violations of the automatic stay.

[31]

When the government unit violating the automatic stay is the Internal Revenue Service, the recovery of sanctions is further complicated by recent all-but-incomprehensible amendments to the Tax Code. Section 3102 of the Internal Revenue Service Restructuring and Reform Act of 199862 amended 26 U.S.C. § 7433 with respect to taxpayer actions to remedy violations of the automatic stay. Any taxpayer injured by a willful violation of the automatic stay by any officer or employee of the IRS “may petition the bankruptcy court to recover damages against the United States.”63 The “petition” contemplated by 26 U.S.C. § 7433(e)(1) is not the same as an action to remedy a stay violation under 11 U.S.C. § 362(h), but both sections apply to willful stay violations by the IRS. Ambiguously, § 7433(e)(2)(A) of the Tax Code recites that the taxpayer petition “shall be the exclusive remedy for recovering damages resulting from such actions,”64 but § 7433(e)(2)(B) then makes exception to this exclusivity for “an action under section 362(h)” of the Bankruptcy Code. The net result seems to be that Chapter 13 debtors injured by a willful stay violation by the IRS have an option to petition the bankruptcy court for damages under 26 U.S.C. § 7433(e)(1) or to move the bankruptcy court for damages under 11 U.S.C. § 362(h).

[32]

If the petition remedy is elected, there is a new limitation on damages in 26 U.S.C. § 7433(b) and a new exhaustion of administrative remedies requirement in 26 U.S.C. § 7433(d)(1) as a predicate to any award of damages.

[33]

The exhaustion of administrative remedies requirement seems at first not to apply to actions under 11 U.S.C. § 362(h);65 however, the recovery of damages in an action under 11 U.S.C. § 362(h) is limited by 26 U.S.C. § 7433(e)(2)(B)(i) and (ii) such that “administrative and litigation costs”66 cannot be recovered unless administrative remedies are exhausted, consistent with 26 U.S.C. § 7430. This may come as something of a shock to Chapter 13 practitioners: the routine practice in the bankruptcy courts of awarding attorneys’ fees as damages for a willful stay violation by the IRS67 is now precluded by 26 U.S.C. § 7433(e)(2)(B); attorneys’ fees and other litigation costs can only be recovered by complying with 26 U.S.C. § 7430, including exhaustion of administrative remedies. Only actual damages other than administrative and litigation costs can be awarded by the bankruptcy court in a § 362(h) action without jumping through the hoops in 26 U.S.C. § 7430.

[34]

If this sounds like gobbledygook, it’s only because the actual language of new 26 U.S.C. § 7433 is almost unintelligible. Chapter 13 lawyers who go after the IRS for willful violations of the automatic stay will need tax counsel and a psychic to unravel 26 U.S.C. § 7433 and its interaction with § 362(h) of the Bankruptcy Code. It looks like Chapter 13 debtors can still use a motion under § 362(h) to seek sanctions against the IRS for a willful violation of the automatic stay, but Congress seems to have created a new separate, nonexclusive, remedy by petition for willful stay violations already covered by § 362(h). The 1998 amendments limit the recovery of administrative and litigation costs by imposing an exhaustion of administrative remedies condition on damages in an action against the IRS under § 362(h). But then there is an inconsistency between the 1998 amendments to 26 U.S.C. § 7433 and the 1994 amendments to § 106(a)(3) with respect to the recovery of costs or fees from the IRS.

[35]

Recovery of litigation costs in an action against the IRS under § 362(h) is now limited by 26 U.S.C. § 7433(e)(2)(B) to the amounts and conditions specified in 26 U.S.C. § 7430. Section 7430 sets conditions that are different from the conditions in 28 U.S.C. § 2412(d)(2)(A), the section that 11 U.S.C. § 106(a)(3) cross-references for the limits on the waiver of sovereign immunity by a governmental unit with respect to judgments for costs or fees. In other words, § 106 waives immunity for the IRS with respect to an award of fees or costs for a willful violation of the automatic stay within limits that are not the same as the new limits on damage awards in § 362(h) actions against the IRS under 26 U.S.C. § 7433(e)(2)(B). 28 U.S.C. § 2412(e) states that “[t]he provisions of this section shall not apply to any costs, fees and other expenses in connection with any proceeding to which section 7430 of the Internal Revenue Code of 1986 applies.” Now that 26 U.S.C. § 7430 applies to awards of administrative and litigation costs in actions under 11 U.S.C. § 362(h), is the cross reference to 28 U.S.C. § 2412(d)(2)(A) in 11 U.S.C. § 106(a)(3) trumped by the exclusion in 28 U.S.C. § 2412(e)? Have fun.

[36]

For stay violations by the IRS that are not willful, the 1998 tax reform legislation makes no direct changes in bankruptcy practice or procedure. Both the petition under 26 U.S.C. § 7433(e)(1) and the action under 11 U.S.C. § 362(h) require proof of a willful violation.

[37]

The bankruptcy courts have not rushed to publish opinions sorting out the new requirements for recovering expenses and fees in stay violation litigation against the IRS. One of the first brave courts found that sanctions for postpetition letters and notices of levy were appropriate, including out-of-pocket expenses for telephone, mileage expenses and the cost of new blood pressure medication; but attorney fees were not recoverable because the debtors did not exhaust administrative remedies:

[O]ut of pocket expenses—telephone, tax and mileage—. . . are reasonable and clearly result from the IRS actions. . . . [T]he timing of Mr. Parker’s drug change and his need to see a doctor about his blood pressure right at the time of the IRS actions is sufficient to establish liability for some costs. . . . [Section 362(h)] allows a debtor to recover attorneys fees if the stay has been violated . . . . Section 106(a)(3) requires that any fees awarded to a debtor under the Bankruptcy Code against a governmental unit “shall be consistent with the provisions and limitations of section 2412(d)(2)(A) of title 28.” . . . [T]he fees must be payable pursuant to 26 U.S.C. § 7430. . . . (1) the debtors must be a prevailing party in a tax case; (2) the proceeding must be an administrative or court proceeding; (3) the action is brought by or against the United States in connection with collection of any tax; and (4) the United States was substantially unjustified in its position. . . . [A] debtor can only recover if he has exhausted his administrative remedies as to that proceeding. 26 U.S.C. § 7430(b)(1). As to the Notice of Levy, an administrative procedure is available as set forth in 26 U.S.C. § 6330(b). The right to a hearing was set forth in the notice. . . . The Parkers did not avail themselves of this right. . . . [N]o fees can be paid. . . . As to the Notices of Taxes Due . . . no administrative procedure applied. There were no administrative procedures to exhaust. . . . The Court concludes that the United States’ position was substantially justified. The United States conceded that the notice violated the stay but properly contested the damages claim based upon the case law. . . . [S]ince the United States’ position on the one notice for which fees can be claimed is substantially justified, no fees can be awarded.68

 

1  See, e.g., In re Hoskins, 266 B.R. 872 (Bankr. W.D. Mo. 2001) (Although Ford violated automatic stay by removing state court collection action to federal district court, no damages are awarded because the debtor would have incurred the same attorney’s fees had Ford first moved for relief from the stay and the debtor failed to raise the automatic stay as a defense in the district court.); In re Lafanette, 208 B.R. 394, 395–96 (Bankr. W.D. La. 1996) (IRS intercept of postpetition tax refund was technical violation of the stay, but no sanctions are appropriate because IRS was [sic] not a creditor and did not have notice of the bankruptcy case. “[T]he IRS was not a creditor . . . . There is no allegation that the IRS otherwise had actual notice . . . . [T]he actions of the IRS in exercising control over the tax refunds was not a willful violation of the automatic stay. . . . [T]he court will neither find the IRS in contempt nor award any monetary damages to the Trustee for the technical violation of the automatic stay by the IRS.”); In re Valentine, 125 B.R. 11 (Bankr. S.D. Ohio 1991) (Setoff by landlord of $200 prepetition security deposit was “technical violation of the automatic stay”; however, court exercised equitable discretion to decline to award damages.); In re Still, 117 B.R. 251, 254 (Bankr. E.D. Tex. 1990) (Although sending notice of condemnation hearing was a technical violation of the automatic stay, where pipeline company was subsequently granted relief from the stay to proceed with the condemnation hearing and the debtor’s claim for actual damages in the amount of $1,400 and attorneys’ fees in the amount of $23,000 showed that the debtor was engaged in “killing an ant with an elephant gun,” the court declined to award damages holding that “the Debtor’s prosecution of de minimus violation of the stay should not be ennobled by the award of attorney’s fees.”); Flowers v. Washington Fed. Sav. Bank (In re Flowers), 94 B.R. 3 (Bankr. D.D.C. 1988) (Postpetition conveyance of title and recording of deed were technical violations of the stay but were not so willful as to justify award of damages.).

 

2  See, e.g., O’Neal v. Beneficial of Tenn. (In re O’Neal), 165 B.R. 859 (Bankr. M.D. Tenn. 1994) (Creditor violated automatic stay by receiving and failing to stop an automatic loan payment deduction from the debtor’s bank account after filing of Chapter 13 case. Creditor ordered to return $116 payment and pay attorney’s fees and costs. Punitive damages were refused.); McLaughlin v. Fireman’s Trust Mortgage Corp. (In re McLaughlin), 96 B.R. 554 (Bankr. E.D. Pa. 1989) (“[S]ubjectively innocent and relatively justifiable” violation of the automatic stay can be sanctioned for attorneys’ fees; debtor’s counsel is “an individual injured” by the stay violation and can recover attorneys’ fees from the creditor.).

 

3  11 U.S.C. § 362(h).

 

4  See Colon v. Rivera (In re Colon), 265 B.R. 639, 643 (B.A.P. 1st Cir. 2001) (Former spouse violated automatic stay by continuing support collection action after notice of Chapter 13 case; “Having concluded that Rivera’s actions violated the automatic stay, the court was obligated to consider Colon’s damages claims.”); Peters v. Mason-McDuffie Mortgage Corp. (In re Peters), 184 B.R. 799 (B.A.P. 9th Cir. 1995), rev’d on other grounds, 101 F.3d 618 (9th Cir. 1996). See also Rijos v. Vizcaya (In re Rijos), 263 B.R. 382, 393 (B.A.P. 1st Cir. 2001) (Bank violated automatic stay by sending letters to the debtor after the petition; “The failure to afford the Debtors an opportunity to prove damages thus violated fundamental principles of due process.”).

 

5  See, e.g., In re Steenstra, 280 B.R. 560, 569–70 (Bankr. D. Mass. 2002) (Massachusetts Department of Revenue willfully violated stay by sending letter to debtor’s employer seeking a wage assignment, but actual damages could not be awarded because the debtor failed to prove damages. “[T]he burden remains on the Debtor to prove his actual damages. . . . He has failed to do so. . . . [N]o testimony was offered with respect to the question of attorney’s fees . . . . Where there are no damages proved, none can be awarded.”); Thornburg v. Lynch (In re Thornburg), 277 B.R. 719, 731 (Bankr. E.D. Tex. 2002) (Recording judgment and notice of lis pendens violated the automatic stay, but no sanctions or attorney fees were granted because “[g]iven the blatant disregard of both of these parties for the dignity of this or any other court system and the continuous manipulation of each party to attempt to gain the upper hand in some way, the Court finds that sanctions and attorney fees are not warranted and will not be granted.”); McRoberts v. S.I.V.I. (In re Bequette), 184 B.R. 327, 337 (Bankr. S.D. Ill. 1995) (Purchaser at county tax sale should have sought relief from the stay before petitioning the state court for a tax deed when the redemption period under Illinois law expired after the filing of the debtors’ Chapter 13 petition. However, because the bankruptcy estate retained only bare legal title, the tax sale purchaser’s failure to seek relief from the stay “was not sufficiently egregious to warrant the imposition of damages.”); Debolt v. Comerica Bank (In re Debolt), 177 B.R. 31, 40 (Bankr. W.D. Pa. 1994) (Trustee of ERISA-qualified pension plan willfully violated the automatic stay by paying support to ex-spouse from the debtor’s portion of a pension plan after it received notice of bankruptcy case. “Nonetheless, we will not award punitive damages on this occasion. Despite the technical violation of the stay, we find no evidence on this record of injury or actual damage to Debtor inasmuch as the support obligation is nondischargeable and Debtor is in no position different from that he would have been in absent bankruptcy.”).

 

6  Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478, 482 (9th Cir. 1989). Accord In re Steenstra, 280 B.R. 560, 568 (Bankr. D. Mass. 2002) (“‘A willful violation does not require a specific intent to violate the automatic stay. The standard for a willful violation of the automatic stay under § 362(h) is met if there is knowledge of the stay and the defendant intended the actions which constituted the violation.’”); In re Jackson, 251 B.R. 597, 601 (Bankr. D. Utah 2000) (Refusal to return repossessed car is willful violation of the automatic stay. “A willful violation of the automatic stay occurs when the creditor acts deliberately with knowledge of the bankruptcy petition. Whether the party believes in good faith whether it had a right to the property is not relevant to whether the act was ‘willful’ or whether compensation must be awarded.”); Cox v. Billy Pounds Motors, Inc. (In re Cox), 214 B.R. 635, 641 (Bankr. N.D. Ala. 1997) (Postconfirmation repossession of car was willful violation of stay notwithstanding creditor’s mistaken belief that trustee’s motion to dismiss dissolved stay. “A violation of the automatic stay is a ‘willful violation’ if ‘the violator (1) knew of the automatic stay and (2) intentionally committed the violative act, regardless whether the violator specifically intended to violate the stay.’”).

 

7  Carr v. Security Sav. & Loan Ass’n, 130 B.R. 434 (D.N.J. 1991) (Bank’s refusal to turn over repossessed car after notice of the Chapter 13 filing and demand for turnover by debtor was willful violation of the stay.); Patterson v. Chrysler Fin. Co. (In re Patterson), 263 B.R. 82 (Bankr. E.D. Pa. 2001) (Chrysler willfully violated automatic stay by refusing to return repossessed car.); In re Jackson, 251 B.R. 597 (Bankr. D. Utah 2000) (Creditor that refused to return the debtor’s repossessed car willfully violated the automatic stay and is sanctioned.); Brown v. Town & Country Sales & Serv., Inc. (In re Brown), 237 B.R. 316 (Bankr. E.D. Va. 1999) (Damages for refusing to return repossessed truck and for demanding full payment included turnover of the truck, attorney’s fees of $2,000 and punitive damages in the form of cancellation of the lender’s security interests.); In re Sharon, 200 B.R. 181 (Bankr. S.D. Ohio 1996) (Creditor that repossessed car before the petition violated stay by refusing to return the car when plan proposed to pay for the car, the debtor had insurance, and counsel made repeated requests that the car be returned.), aff’d, 234 B.R. 676 (B.A.P. 6th Cir. 1999); In re Berscheit, 223 B.R. 579, 582 (Bankr. D. Wyo. 1998) (Creditor violated stay by refusing to turn over semi-tractor it repossessed before the petition. Creditor had notice and was provided evidence of insurance, and debtor demanded turnover. Creditor refused turnover, locking up the debtor’s semi-tractor and refusing debtor’s demands for return.); Kirk v. Shamut Bank (In re Kirk), 199 B.R. 70 (Bankr. N.D. Ga. 1996) (Sanctions imposed for creditor’s refusal to return a car repossessed one day before Chapter 13 petition.); In re Belcher, 189 B.R. 16 (Bankr. S.D. Fla. 1995) (Repossession of car after the petition and refusal to return it for nine days after demand is violation of the stay.). See §§ 46.2 [ Prepetition Repossession, Levy, Sale or Conveyance ] § 46.4  Prepetition Repossession, Levy, Sale or Conveyance, 52.1 [ Turnover of Property ] § 50.1  Turnover of Property and 75.1 [ Examples of Stay Violations, and Not ] § 62.1  Examples of Stay Violations, and Not.

 

8  See, e.g., Colon v. Rivera (In re Colon), 265 B.R. 639 (B.A.P. 1st Cir. 2001) (Former spouse willfully violated automatic stay by continuing support collection action.); Barnett v. Edwards (In re Edwards), 214 B.R. 613 (B.A.P. 9th Cir. 1997) (Postpetition recording of lis pendens with full knowledge of Chapter 13 case was willful violation of stay; bankruptcy court appropriately awarded sanctions against ex-spouse and ex-spouse’s counsel.); In re Klein, 226 B.R. 542 (Bankr. D.N.J. 1998) (Debtor, an attorney, was entitled to actual damages, including fees for representing himself, based on bank’s refusal to release a restraint on accounts after notice of Chapter 13 filing and a demand to release the accounts.); In re Manuel, 212 B.R. 517, 519 (Bankr. E.D. Va. 1997) (Finance company violated stay by failing to stop a prepetition garnishment after notice of Chapter 13 case. Garnishment was filed on June 4 and was effective until August 21. Debtor filed Chapter 13 on June 23, and on July 1, debtor’s counsel wrote the finance company and followed up with a telephone call warning of the Chapter 13 case. Finance company ignored the letter and telephone call. Finance company had “an affirmative obligation not to continue a violation of the automatic stay, acted willfully when [it] failed to promptly dismiss the garnishment against debtor’s wages.” Debtor awarded $250 for attorney’s fees.); In re Gault, 136 B.R. 736 (Bankr. E.D. Tenn. 1991) (IRS willfully violated the automatic stay, entitling debtor to punitive damages of $2,500, when with actual knowledge of the bankruptcy and after contact from debtor’s attorney, IRS repeatedly issued notices of levy on the debtor’s property.).

 

9  See, e.g., Carr v. Security Sav. & Loan Ass’n, 130 B.R. 434 (D.N.J. 1991) (Creditor’s refusal to turn over car was a violation of the automatic stay notwithstanding creditor’s belief that the debtor was not eligible for Chapter 13 relief.); In re Graham, No. 02-51191, 2002 WL 31045312, at *2 (Bankr. M.D.N.C. Aug. 5, 2002) (unpublished) (“A willful act is a deliberate act with knowledge of the bankruptcy petition. . . . The Debtor is not required to make a showing of malice or reckless disregard. . . . That [the creditor] thought the stay did not apply is not relevant to the issue of whether there was a willful violation.”); In re Georgeff, 226 B.R. 852 (Bankr. S.D. Ohio 1998) (Creditor willfully violated stay by initiating a garnishment while the Chapter 13 case was pending; that creditor was uncertain whether an order for conversion or dismissal had become effective is no defense.); Cox v. Billy Pounds Motors, Inc. (In re Cox), 214 B.R. 635 (Bankr. N.D. Ala. 1997) (Postconfirmation repossession of car was willful violation of stay notwithstanding creditor’s mistaken belief that trustee’s motion to dismiss dissolved stay.); Diviney v. NationsBank of Tex. (In re Diviney), 211 B.R. 951, 966 (Bankr. N.D. Okla. 1997) (Bank willfully violated stay by repossessing debtor’s car, demanding payment of a claim that was discharged in a prior Chapter 7 case and finally selling debtor’s car after reinstatement of dismissed Chapter 13 case. “Bank knew or should have known that the reinstatement of a case reinstates the automatic stay.”); In re Henstra, 75 B.R. 260 (Bankr. D. Minn. 1986) (Notwithstanding that debtor was obviously ineligible for Chapter 13 relief, creditor violated automatic stay by proceeding with state court replevin action.). But see In re Casse, 219 B.R. 657 (Bankr. E.D.N.Y. 1998) (Mortgage holder did not violate automatic stay when it conducted foreclosure sale two days after debtor filed fourth bankruptcy case because order of dismissal “with prejudice” in third bankruptcy case rendered debtor ineligible and filing in violation of dismissal order was a nullity.). See also § 6.1 [ Consequences of Ineligibility: Jurisdiction and the Automatic Stay ] § 9.5  Consequences of Ineligibility: Jurisdiction; Automatic Stay; Strike, Dismiss or Excuse?.

 

10  Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478 (9th Cir. 1989). Accord Chesnut v. Brown (In re Chesnut), 300 B.R. 880, 887–88 (Bankr. N.D. Tex. 2003) (Lienholder violated stay by foreclosing on property titled as nonfiling spouse’s separate property when debtor claimed a community property interest; “[t]hat Defendants acted on the advice of counsel does not alter this conclusion. Counsel’s error is between counsel and Defendants. It does not provide Defendants with an excuse for their violation of the law.”). See Smoot v. Southtrust Mobile Servs., Inc. (In re Smoot), 134 B.R. 960 (Bankr. N.D. Ala. 1991) (It was willful violation of the automatic stay, entitling debtor to $816.85 of actual damages, including lost wages, attorneys’ fees and expenses, and punitive damages of $5,000, where in misguided reliance on Southrust Bank of Alabama v. Thomas (In re Thomas), 883 F.2d 991 (11th Cir. 1989), creditor with an unperfected security interest in mobile home intentionally did not file a proof of claim, did not seek relief from the stay, but proceeded in state court after confirmation to take a money judgment and a judgment for possession.); Littke v. Trust Corp. Mortgage Co. (In re Littke), 105 B.R. 905 (Bankr. N.D. Ind. 1989).

 

11  175 B.R. 890 (W.D.N.C. 1994).

 

12  175 B.R. at 891.

 

13  175 B.R. at 892–94. Accord In re Peterson, 297 B.R. 467, 470–71 (Bankr. W.D.N.C. 2003) (Bank’s second postpetition contact with debtor was an “innocent clerical error,” not a willful violation of the stay. After confirmation, Chevy Chase Bank sent a letter threatening repossession of the debtor’s car. After contact from debtor’s attorney, the bank withdrew the threat and apologized. Nine months later, the bank debited the debtor’s checking account $478.48 for payment of its car loan. The electronic draft was caused by a “automatic debit” that the bank failed to remove when it received notice of bankruptcy. Debtor’s attorney, without contacting Chevy Chase Bank, filed a motion for sanctions. Chevy Chase immediately refunded the debit. “[A] volitional act alone does not constitute a sanctionable violation. . . . [A]n ‘innocent clerical error’ does not constitute a sanctionable violation of the stay. . . . Chevy Chase Bank’s actions amount at most to an ‘innocent clerical error’ or simple mistake. . . . The creditor was notified of the bankruptcy case; there was a previous inappropriate contact that had been remedied; a subsequent collection event was triggered by an error made by an employee of the creditor; an inappropriate contact resulted; a motion for sanctions was filed; and the error was quickly remedied. . . . Chevy Chase’s actions do not constitute a willful violation of the automatic stay.”). See also Soto v. Lanoue (In re Soto), 302 B.R. 757 (Bankr. D.N.H. 2003) (Although lessor violated automatic stay by going to police department to recover property from the debtor, because the lessor had no specific warning about the automatic stay, the violation was not willful and no sanctions were appropriate.).

 

14  884 F.2d 478 (9th Cir. 1989).

 

15  523 U.S. 57, 118 S. Ct. 974, 140 L. Ed. 2d 90 (1998) (Medical malpractice is not willful and malicious because debtor did not intend to cause injury.). See, e.g., Conte v. Gautam (In re Conte), 33 F.3d 303 (3d Cir. 1994) (Section 523(a)(6) requires a finding that debtor acted with a purpose of producing injury or deliberately and with knowledge that there was a “substantial certainty” of producing injury. That debtor “deliberately committed a wrongful act with a high probability of producing injury” is not enough because such a test would capture all mere reckless acts.); Dorr, Bentley & Pecha v. Pasek (In re Pasek), 983 F.2d 1524, 1527 (10th Cir. 1993) (“[Section] 523(a)(6) requires not only intentional conduct . . . , but also intentional or deliberate injury . . . [which need not necessarily be proved by specific intent to injure.]”); Perkins v. Scharffe, 817 F.2d 392 (6th Cir.), cert. denied, 484 U.S. 853, 108 S. Ct. 156, 98 L. Ed. 112 (1987) (Professional negligence case holding for purposes of § 523(a)(6) the terms “willful and malicious” include a reckless disregard for consequences of an intended action.).

 

16  280 B.R. 560 (Bankr. D. Mass. 2002).

 

17  See §§ 46.1 [ Postpetition Earnings ] § 46.3  Postpetition Earnings and 69.1 [ Alimony and Support Exception ] § 58.5  Alimony and Support Exception.

 

18  280 B.R. at 568.

 

19  280 B.R. at 568.

 

20  302 B.R. 757 (Bankr. D. N.H. 2003).

 

21  302 B.R. at 760.

 

22  See In re Belcher, 189 B.R. 16 (Bankr. S.D. Fla. 1995) (Attorney’s fees for violation of the automatic stay reduced from $1,400 to $20 because debtor’s counsel could have avoided repossession of the debtor’s car and delay in return of the car had counsel more carefully communicated with creditor in the first instance.).

 

23  See Rijos v. Vizcaya (In re Rijos), 263 B.R. 382, 393–94 (B.A.P. 1st Cir. 2001) (“[T]he bankruptcy court . . . determined, as a matter of law, that [the debtors] had a duty to mitigate their damages, apparently adopting [the creditor’s] argument that a telephone call or letter would have resolved the problem. Nothing in the Bankruptcy Code or Federal Rules of Bankruptcy Procedure suggests that such a duty exists.”).

 

24  In re Smith, 245 B.R. 622, 624–25 (Bankr. W.D. Mo. 2000).

 

25  In re Hoskins, 266 B.R. 872 (Bankr. W.D. Mo. 2001).

 

26  In re Peterson, 297 B.R. 467, 472 (Bankr. W.D.N.C. 2003).

 

27  See, e.g., In re Seal, 192 B.R. 442 (Bankr. W.D. Mich. 1996) (Car lender intentionally violated the automatic stay, maliciously harassed the debtors, and was in contempt of court orders by contacting the debtors after the petition, demanding payment, standing in front of the debtor’s car in the parking lot after a bankruptcy court hearing, and intimidating the debtors over the phone.); Meis-Nachtrab v. Griffin (In re Meis-Nachtrab), 190 B.R. 302 (Bankr. N.D. Ohio 1995) (Debtor’s former domestic relations attorney willfully violated stay by repeatedly billing debtor for prepetition services after counsel had knowledge of the Chapter 13 petition.); LaTempa v. Long, 58 B.R. 538 (Bankr. W.D. Va. 1986) (Compensatory and punitive damages awarded where creditor repossessed van after Chapter 13 petition and refused to return van notwithstanding actual knowledge of the timing of the filing and repossession.).

 

28  See Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 976 (1st Cir. 1997) (“Treating an action taken in contravention of the automatic stay as void places the burden of validating the action after the fact squarely on the shoulders of the offending creditor.”); In re Wilson-Gomes, 281 B.R. 503 (Bankr. D.R.I. 2002) (Petition to foreclose right of redemption violated stay and is void under Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (1st Cir. 1997).); Thornburg v. Lynch (In re Thornburg), 277 B.R. 719 (Bankr. E.D. Tex. 2002) (Recording judgment and notice of lis pendens exceeded scope of agreed order for stay relief and were voidable.); In re Townsville, 268 B.R. 95 (Bankr. E.D. Pa. 2001) (Postpetition publication of notices continuing foreclosure sale may have violated the automatic stay because the costs of publication were added to the foreclosure judgment; additional costs are void.); In re Donovan, 266 B.R. 862 (Bankr. S.D. Iowa 2001) (Purchaser at prepetition tax sale violated stay by seeking tax deed after petition; remedy is that deed is void but lien remains to secure purchaser for the taxes paid and expenses incurred.); In re Williams, 257 B.R. 297 (Bankr. W.D. Mo. 2001) (Disagreeing with In re Vierkant, 240 B.R. 317 (B.A.P. 8th Cir. 1999), foreclosure sale in violation of the automatic stay is voidable, not void ab initio.); In re Halas, 249 B.R. 182 (Bankr. N.D. Ill. 2000) (Default judgment in violation of the automatic stay is void.); In re Smith, 245 B.R. 622, 624–25 (Bankr. W.D. Mo. 2000) (Foreclosure sale one day after Chapter 13 petition is void. “In [LaBarge v. Vierkant (In re Vierkant), 240 B.R. 317 (B.A.P. 8th Cir. 1999)], the BAP found that ‘actions taken in violation of the automatic stay are void ab initio, and that the burden is upon the offending party to request retroactive relief from or annulment of the automatic stay in order to validate the void action.’”); In re Izzi, 196 B.R. 727 (Bankr. E.D. Pa. 1996) (State court judgment during husband’s prior Chapter 13 case is void ab initio in subsequent Chapter 13 case.); In re Ferrante, 195 B.R. 990 (Bankr. N.D.N.Y. 1996) (Recording of deficiency judgment that created a postpetition lien on property of the Chapter 13 estate was an action in violation of the stay and was “void.”); In re Nail, 195 B.R. 922 (Bankr. N.D. Ala. 1996) (Foreclosure sale after oral order reinstating a dismissed Chapter 13 case but before entry of a written order violated stay and is void.); In re Murray, 193 B.R. 20 (Bankr. E.D. Cal. 1996) (Citing Schwartz v. United States (In re Schwartz), 954 F.2d 569 (9th Cir. 1992), IRS assessment in violation of the stay in a Chapter 13 case is void.); Willman v. Pollard (In re Willman), 192 B.R. 207, 210 (Bankr. D. Ariz. 1996) (Because acts in violation of the stay are void in the Ninth Circuit, continuances of foreclosure sale after confirmation of a Chapter 13 plan that cured defaults could not support sale conducted after dismissal and before reinstatement of case.) [probably rev’d on other grounds by Peters v. Mason-McDuffie Mortgage Corp. (In re Peters), 101 F.3d 618 (9th Cir. 1996)]; In re Stewart, 190 B.R. 846 (Bankr. C.D. Ill. 1996) (Buyer of delinquent tax claims against debtor’s property violated automatic stay by seeking tax deed after it learned of the debtor’s confirmed plan. Tax deed is void ab initio, or creditor must accept repayment of taxes, penalties, and interest as redemption in full.).

 

29  Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991).

 

30  Smith v. First Am. Bank, N.A. (In re Smith), 876 F.2d 524 (6th Cir. 1989). Compare Easley v. Pettibone Mich. Corp. Indus. & Constr. Mach., 990 F.2d 905 (6th Cir. 1993) (Actions in violation of the automatic stay are “voidable.”).

 

31  See, e.g., Pro Fin., Inc. v. Spriggs (In re Spriggs), 219 B.R. 909 (B.A.P. 10th Cir. 1998) (Distinguishing Job v. Calder (In re Calder), 907 F.2d 953 (10th Cir. 1990), foreclosure sale and recording of deed after Chapter 13 petition violated automatic stay notwithstanding that mortgage holder did not receive notice and sale was void.); Elbar Inv., Inc. v. Pierce (In re Pierce), 272 B.R. 198, 212 (Bankr. S.D. Tex. 2001) (“[A] foreclosure or judicial sale that violates the § 362 automatic stay has no legal effect, regardless of whether the parties knew that the statutory stay existed, unless the bankruptcy court retroactively annuls the stay and thereby authorizes (validates) the sale.”); In re Smith, 245 B.R. 622 (Bankr. W.D. Mo. 2000) (Foreclosure sale one day after Chapter 13 petition is void notwithstanding that debtor’s attorney failed to give immediate notice to the foreclosing creditor.); Smith v. London (In re Smith), 224 B.R. 44 (Bankr. E.D. Mich. 1998) (Foreclosure sale in violation of stay is void notwithstanding that mortgage holder did not have notice of filing.); In re Fulmer-Vaught, 218 B.R. 56 (Bankr. W.D. Mo. 1998) (Foreclosure sale after filing of Chapter13 case is void notwithstanding that purchaser was without notice and in good faith; however, § 549(c) preserves the purchase.).

 

32  Cox v. Billy Pounds Motors, Inc. (In re Cox), 214 B.R. 635, 645 (Bankr. N.D. Ala. 1997). See Bishop v. U.S. Bank/First Star Bank, N.A. (In re Bishop), 296 B.R. 890, 898–99 (Bankr. S.D. Ga. 2003) (“Punitive damages are permitted for a willful violation of the automatic stay . . . . ‘Appropriate circumstances’ include actions taken with malicious intent to harm and actions taken in arrogant defiance of federal law. . . . [T]he repo agent’s actions in the recent incident were malicious in their intent to produce anxiety in Debtor. . . . Bank has allowed or instructed its repo agents to . . . engage in a full repertoire of scare tactics available outside of bankruptcy . . . . Bank’s acts in manipulating Debtor by contact with his mother and the local police [are] reprehensible. Worse, Bank has made no effort to defend its actions, mitigate their effect, or show any degree of remorse. . . . [A]n award of $50,000.00 in punitive damages is warranted.”); Smith v. Homes Today, Inc. (In re Smith), 296 B.R. 46, 62 (Bankr. M.D. Ala. 2003) (“[C]allous, if not brutal” repossession of mobile home with knowledge of Chapter 13 petition justified punitive damages of $25,000. “Homes Today violated the automatic stay in a willful and malicious manner, calculated to humiliate Smith and cause her emotional distress.”); Diviney v. NationsBank of Tex. (In re Diviney), 211 B.R. 951, 968 (Bankr. N.D. Okla. 1997) (Court applied a four-part test to the question of punitive damages: “(1) the nature of the defendant’s conduct; (2) the defendant’s ability to pay; (3) motives of the defendant; and (4) any provocation by the debtor.”), aff’d, 225 B.R. 762 (B.A.P. 10th Cir. 1998).

 

33  See, e.g., Bolen v. Mercedes Benz, Inc. (In re Bolen), 295 B.R. 803, 811–12 (Bankr. D.S.C. 2002) (Damages for repossessing truck after the petition and refusing to return it for 10 weeks included lost wages of $5,600, attorney fees of $5,000 and punitive damages of $12,500. “[P]unitive damages are warranted . . . [when] creditors . . . demonstrate their disdain of the automatic stay by retaining property that was repossessed improperly. . . . Defendant retained the vehicle for ten weeks before returning it. . . . [I]t took no steps to contact Debtor or his counsel to attempt to return the Truck to Debtor. . . . [A] creditor who blatantly violates the automatic stay may not do nothing without running the risk of being assessed punitive damages for a willful violation; it must actively attempt to return matters to the status quo.”); In re Graham, No. 02-51191, 2002 WL 31045312 (Bankr. M.D.N.C. Aug. 5, 2002) (unpublished) (Lender’s willful stay violation by repossessing car with knowledge of the Chapter 13 petition and retaining the car for two months is sanctioned with $1,000 of actual damages, $750 in attorney fees and $1,000 of punitive damages.).

 

34  See, e.g., In re Knight, No. 99-71239, 2003 WL 22038423, at *2 (Bankr. C.D. Ill. Aug. 28, 2003) (unpublished) (Illinois Department of Revenue assessed punitive damages of $1,000 for repeated violations of the automatic stay and discharge injunction in a Chapter 13 case. “The failure of the Court to award compensatory damages does not preclude an award of punitive damages.”).

 

35  See, e.g., Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265, 268 (1st Cir. 1999) (Foreclosure proceeding in violation of stay included public notice to debtor’s neighbors—debtor awarded $25,000 for emotional distress and attorney fees of $18,220.68. “[E]motional damages qualify as ‘actual damages’ under § 362(h). . . . Kaneb provided specific information about the sharp decline in social invitations and outings following Fleet’s violation of the automatic stay . . . . He then testified about the emotion distress he experienced because of these changes in his life. . . . An honest accounting of actual damages under § 362(h) must include the psychological suffering of this eighty-five year old retired widower.”); Varela v. Ocasio (In re Ocasio), 272 B.R. 815, 820 (B.A.P. 1st Cir. 2002) (Debtor awarded compensatory damages of $1,000, punitive damages of $9,000 and attorney’s fees when creditor threatened to collect $425 debt “from your face.”); Ford Motor Credit Co. v. Florio (In re Florio), 229 B.R. 606, 608 (S.D.N.Y. 1999) (For willful repossession of business vehicles in violation of a conditional order for relief from the stay, FMCC was ordered to pay “1) $7500.00 in lost business income, 2) $1,199.85 for the cost of renting a replacement truck, and 3) reasonable attorneys’ fees after proper application to the Bankruptcy Court.”); Carr v. Security Sav. & Loan Ass’n, 130 B.R. 434 (D.N.J. 1991) (Debtor was awarded costs of car rental and attorneys’ fees where creditor willfully violated automatic stay by refusing to turn over car it repossessed before the petition.); Price v. United States, 130 B.R. 259 (N.D. Ill. 1991) (Affirming bankruptcy court award of attorneys’ fees and costs against IRS for willful violation of the automatic stay), aff’d in part, rev’d and remanded in part, 42 F.3d 1068 (7th Cir. 1994) (Computer-generated notice of intent to levy by IRS was a violation of the automatic stay, and IRS waived sovereign immunity under prior version of § 106 and under § 106 as amended by the Bankruptcy Reform Act of 1994. However, award of attorneys’ fees and costs reversed and remanded for recalculation because 1994 Act retroactively applies new guidelines for calculating fees and costs awarded against a governmental unit in stay litigation.); Chesnut v. Brown (In re Chesnut), 300 B.R. 880 (Bankr. N.D. Tex. 2003) (Willful stay violation by foreclosure is sanctioned with order to pay $10,000; because debtor lacked credibility and concealed property in prior Chapter 13 case, balance of $10,000 after payment of attorney fees is forfeited to United States as a fine for “unclean hands.”); In re Knight, No. 99-71239, 2003 WL 22038423 (Bankr. C.D. Ill. Aug. 28, 2003) (unpublished) (Illinois Department of Revenue assessed punitive damages of $1,000 for repeated violations of the automatic stay and discharge injunction in a Chapter 13 case.); Bishop v. U.S. Bank/First Star Bank, N.A. (In re Bishop), 296 B.R. 890 (Bankr. S.D. Ga. 2003) (Compensatory damages including attorney fees and emotional distress and punitive damages of $50,000 awarded against First Star Bank for willful violation of stay when repo agent contacted debtor’s mother to find the debtor and repossessed pickup truck after confirmation with knowledge of the bankruptcy case, and First Star used a law enforcement officer to threaten incarceration; First Star failed to answer or appear.); In re Welch, 296 B.R. 170 (Bankr. C.D. Ill. 2003) (For willfully violating stay by taking judgment and garnishing wages, American General assessed $250 in attorney fees and $500 of punitive damages.); Smith v. Homes Today, Inc. (In re Smith), 296 B.R. 46 (Bankr. M.D. Ala. 2003) (“[C]allous, if not brutal” repossession of mobile home with knowledge of Chapter 13 petition justified actual damages for lost wages and emotional distress of $25,000, punitive damages of $25,000 and attorney fees.); In re Johnson, No. 03-66402-PWB, 2003 WL 21703529 (Bankr. N.D. Ga. July 18, 2003) (unpublished) (Sale of car on Monday after telephonic notice of electronic filing of Chapter 13 petition on Sunday was willful violation of the stay warranting recovery of the value of the car, a $300 attorney fee and punitive damages of $750.); Bolen v. Mercedes Benz, Inc. (In re Bolen), 295 B.R. 803 (Bankr. D.S.C. 2002) (Damages for repossessing truck after the petition and refusing to return it for 10 weeks included lost wages of $5,600, attorney fees of $5,000 and punitive damages of $12,500.); Brown v. American Sav. Credit Union (In re Brown), Nos. 3:02-BK-23056 E, AP 3-02-AP-1350, 2003 WL 21402570 (Bankr. E.D. Ark. May 1, 2003) (unpublished) (Refusal to return car repossessed before the petition violated stay and is sanctioned with compensatory damages, including $30 per week the debtor spent to have his children picked up from school, $25 per week for transportation to and from work and $200 for time the debtor rented a car.); Headrick v. Georgia (In re Headrick), 285 B.R. 540 (Bankr. S.D. Ga. 2001) (For stay violation by state of Georgia, attorney fees of $38,502.23 are awarded together with $200 of actual damages.); In re Graham, No. 02-51191, 2002 WL 31045312 (Bankr. M.D.N.C. Aug. 5, 2002) (unpublished) (Lender’s willful stay violation by repossessing car with knowledge of the Chapter 13 petition and retaining the car for two months is sanctioned with $1,000 of actual damages, $750 in attorney fees and $1,000 of punitive damages.); In re Parker, 279 B.R. 596 (Bankr. S.D. Ala. 2002) (Sanctions against IRS for postpetition letters and notices of levy include out-of-pocket expenses for telephone, tax and mileage and the cost of new blood pressure medication.); Davis v. Gatorwheel, Inc. (In re Davis), 265 B.R. 453 (Bankr. N.D. Fla. 2001) (Car lender’s refusal to turn over car for one month after repossession sanctioned with actual damages of $169, attorney fees of $2,062.50 and punitive damages of $4,500.); Emberton v. Lobb (In re Emberton), 263 B.R. 817 (Bankr. W.D. Ky. 2001) (Compensatory damages of $8,758.21 and punitive damages of $26,274.63 awarded when buyer under installment sales contract initiated prosecution, arrest and 21 days’ incarceration of the debtors. Commonwealth attorney was permanently enjoined from enforcing a pretrial diversion agreement, was directed to vacate the debtors’ pleas and was ordered to expunge the debtors’ criminal records.); Patterson v. Chrysler Fin. Co. (In re Patterson), 263 B.R. 82, 98 (Bankr. E.D. Pa. 2001) (Chrysler willfully violated automatic stay by refusing to return repossessed car. Debtor is entitled to attorney fees, costs and punitive damages. “Chrysler, an institutional lender, has established procedures for dealing with borrowers who file bankruptcy. Concluding that Debtor was a ‘flight risk,’ it chose to ignore them in this case. That decision merits the award of punitive damages in the amount of $4,500.”); In re Meeks, 260 B.R. 46 (Bankr. M.D. Fla. 2000) (Debtor awarded $35,000 in punitive damages, $479.35 for lost wages and $40 a day for car rental when car lender violated stay by contacting the debtor, demanding payment and repossessing the debtor’s car.); In re Johnson, 253 B.R. 857 (Bankr. S.D. Ohio 2000) (Actual damages of $6,669, plus $1,000 for emotional distress, and punitive damages of $1,000 assessed creditor and creditor’s counsel for refusing to release a garnishment after the filing of the Chapter 13 case, for filing retaliatory motions for sanctions and disciplinary proceedings against the debtors’ attorney and for refusing amicable settlement opportunities offered by debtors’ counsel.); In re Kilgore, 253 B.R. 179 (Bankr. D.S.C. 2000) (Sanction of $3,000 assessed under Bankruptcy Rule 9011 and § 105 when mortgage holder hired two law firms, one to seek relief from the stay and the other to bring a foreclosure action, and when the mortgage holder realized it had failed to properly account for payments from the debtor, it told one firm but not the other to stop action against the debtor. Bankruptcy Rule 9011 provides a remedy even though the mortgage holder did not sign any documents because the client, not the attorneys, caused the problems.); In re Jackson, 251 B.R. 597, 601–02 (Bankr. D. Utah 2000) (Creditor that refused to return the debtor’s repossessed car willfully violated the automatic stay and is sanctioned with the lost rental value of the car. “[A] comparable vehicle would rent for $35 per day. . . . [The creditor] first learned of the Debtor’s bankruptcy on December 3, 1999, and returned the vehicle on April 5, 2000 (122 days later), which at $35 per day is $4,270.”); In re Fridge, 239 B.R. 182, 191–92 (Bankr. N.D. Ill. 1999) (Attorney fees in the amount of $6,484.37 and $2,000 in punitive damages awarded for questioning the debtor under oath in aid of collection of a prepetition judgment with actual knowledge of Chapter 13 case. “Under § 362(h) ‘damages’ are defined expressly as ‘including costs and attorney’s fees.’ Some opinions of bankruptcy judges have found that the award of attorney’s fees under § 362(h) is an independent matter from the issue of actual damages. . . . The resultant attorney’s fees incurred are damages to the debtor in every real sense. Congress recognized that fact in the way that it worded te statute. Section 362(h) expressly authorizes the award of costs and attorney’s fees as part of damages to be considered because the statute says that ‘damages’ are ‘including costs and attorneys fees.’ . . . Punitive damages will be allowed under § 362 . . . to make clear that the practice of this firm and others of obtaining information from a debtor in bankruptcy to bring before the state judge to prompt proceedings that harass the debtor is not acceptable.”); Brown v. Town & Country Sales & Serv., Inc. (In re Brown), 237 B.R. 316 (Bankr. E.D. Va. 1999) (Damages for refusing to return repossessed truck and for demanding full payment included turnover of the truck, attorneys’ fees of $2,000 and punitive damages in the form of cancellation of the lender’s security interests.); In re Riddick, 231 B.R. 265 (Bankr. N.D. Ohio 1999) (Collection agency that violated stay by repeatedly contacting the debtor to collect student loan liable for damages under § 362(h) of $850 for attorneys’ fees and $3,000 in punitive damages, $500 for each of the contacts.); Gullett v. Continental Casualty Co. (In re Gullett), 230 B.R. 321 (Bankr. S.D. Tex. 1999) (Workers’ compensation carrier that willfully violated stay by exercising a disputed recoupment and by continuing to litigate administrative and legal proceedings in state court after the petition in bad faith ordered to pya $30,258 for attorneys’ fees, $40,000 as sanctions and $8,619.54 plus interest for overpayments offset by the carrier. Appears to sustain debtor’s claim for emotional distress.); In re Georgeff, 226 B.R. 852 (Bankr. S.D. Ohio 1998) (Actual damages, attorneys’ fees and $1,000 of punitive damages awarded for willful violation of stay when creditor initiated a garnishment while Chapter 13 case was pending.); Walters v. Sherwood Mun. Court (In re Walters), 219 B.R. 520 (Bankr. W.D. Ark. 1998) (Municipality willfully violated automatic stay by arresting debtor and forcing payment of prepetition fine and restitution. Municipal Court ordered to refund the funds it extracted from the debtor with interest and attorneys’ fees totaling $2,044.56.); Cox v. Billy Pounds Motors, Inc. (In re Cox), 214 B.R. 635 (Bankr. N.D. Ala. 1997) (Creditor willfully violated automatic stay by repossessing debtor’s car. Debtor entitled to $1,000 for attorney fees and $5,000 for the loss of a job. Compensatory damages can be recouped from the claim owed the creditor with the result that the creditor’s claim was satisfied in full, the lien on the debtor’s car was released, and additional damages were recoverable directly from the creditor.); Carpio v. Smith (In re Carpio), 213 B.R. 744 (Bankr. W.D. Mo. 1997) (Participants in postpetition foreclosure sale who had notice of the bankruptcy case willfully violated the automatic stay. Fees and costs collected at the closing, punitive damages of $1,000, and attorney fees were recovered by the debtor.); Diviney v. NationsBank of Tex. (In re Diviney), 211 B.R. 951, 961–69 (Bankr. N.D. Okla. 1997) (Compensatory and punitive damages awarded because bank willfully violated stay by repossessing debtor’s car, demanding payment of claim that was discharged in prior Chapter 7 case, and finally selling car after reinstatement of dismissed Chapter 13 case. Debtor was discharged in a Chapter 7 case and then filed two Chapter 13 cases. The first Chapter 13 case was dismissed. A month later, the debtor refiled. The bank made and settled a motion for relief from the stay before confirmation in second Chapter 13 case. Confirmed plan treated bank as a secured creditor to the extent of $3,000 and paid nothing on account of deficiency discharged in prior Chapter 7 case. After confirmation, case was dismissed. Debtor’s motion to reinstate was granted, and after reinstatement, bank repossessed car. Bank refused to return the car. Bank demanded payment of unsecured portion of its debt that was discharged in prior Chapter 7 case. Bank sold the car, and a collection agency contacted the debtor, demanding payment of the deficiency. “Debtors must prove the violation of the automatic stay by ‘clear and convincing evidence’ . . . . Bank held on to, and ultimately sold, the Car, applying the funds which it received to a debt which had been discharged. The Bank also knowingly, intentionally and voluntarily informed the Debtors that it would not return the Car unless the Bank was paid additional monies in violation of the Final Plan. This Court has difficulty envisioning conduct more worthy of the title ‘willful.’ . . . Bank knew or should have known that the reinstatement of a case reinstates the automatic stay.” Debtors awarded actual damages of $2,500, the value of the car, lost wages from pizza delivery work of $315, and actual attorney fees. Damages for “lost educational benefits” were “speculative” and not awarded. Damages for “emotional distress” were refused because of lack of medical evidence. Describing the bank’s conduct as “shocking, if not outrageous,” “[w]ere this Court to limit its award to the actual damages incurred by the Debtors, it would be sending a message to Bank and to all similarly situated creditors that compliance with federal bankruptcy law is optional at their discretion. . . . This Court wishes to send a clear message that the conduct of the Bank in this case is not tolerable. . . . [T]he court determines that an award of $40,000.00 in punitive damages is appropriate.”), aff’d, 225 B.R. 762 (B.A.P. 10th Cir. 1998); Kirk v. Shamut Bank (In re Kirk), 199 B.R. 70 (Bankr. N.D. Ga. 1996) (Debtor awarded compensatory damages in the amount of $500 where creditor refused to return a car repossessed one day before the Chapter 13 petition, debtor was required to file an adversary proceeding to recover the car, and the creditor failed to file an answer, failed to appear at the hearing on the debtor’s complaint, and failed to respond or appear at the hearing on debtor’s motions for sanctions.); Mock v. Hannet, Inc. (In re Mock), 197 B.R. 468 (Bankr. E.D. Pa. 1996) (Attorneys’ fees and expenses for stay violation are imposed on purchaser of property who knowingly recorded a deed after filing of Chapter 13 petition.); In re Seal, 192 B.R. 442 (Bankr. W.D. Mich. 1996) (Car lender intentionally violated the automatic stay, maliciously harassed the debtors, and was in contempt of court orders to provide the debtors with a car title noting the creditor’s first lien. Stay violations included contacting the debtors after the petition, demanding payment, standing in front of the debtor’s car in the parking lot after a bankruptcy court hearing, and intimidating the debtors over the phone. Attorneys’ fees, lost wages and benefits, rental car expenses, and punitive damages of $750 were awarded, totaling $2,970.40. Because damages exceeded balance of creditor’s claim, debtors were permitted to set off damages, leaving the creditor owing $796.93. Citing Stevens v. Baxter (In re Stevens), 187 B.R. 48 (Bankr. S.D. Ga. 1995), debtors can collect from distributions to the creditor in other Chapter 13 cases if necessary.); Tarrent v. Douglas, Ga. (In re Tarrent), 190 B.R. 704 (Bankr. S.D. Ga. 1995) (City violated §§ 366 and 362 by terminating electric service after Chapter 13 petition and refusing to reinstate service. Chapter 13 was filed on July 25. City terminated electric service on August 1, the day it received notice of the filing. Debtor tendered $125 deposit, but city insisted that debtor also repay prepetition utility bills. Collection of prepetition utility bills as a condition for reinstatement violated §§ 366 and 362. City ordered to pay attorneys’ fees, $190 for lost food, $32 for alternative lodging, and punitive damages.); Meis-Nachtrab v. Griffin (In re Meis-Nachtrab), 190 B.R. 302, 308 (Bankr. N.D. Ohio 1995) (Debtor’s former domestic relations attorney willfully violated stay by billing debtor after the petition and accepting payments. Alleged voluntary agreement to pay prepetition debt is no defense. Former counsel knew of Chapter 13 petition and repeatedly billed the debtor for the prepetition debt. Former counsel ordered to return $375 to pay attorneys’ fees of $562.50 and to pay punitive damages of $250. “[T]he Debtor is not entitled to damages based on the fact that she became ‘stressed out’, ‘nervous’ and ‘nauseous’ in apprehension of the instant hearing.”); In re Harrison, 185 B.R. 607 (Bankr. D. Kan. 1995) (Sanctions including a $150 fine for civil contempt are appropriate where collection agency violated the automatic stay by bringing suit in state court after notice of the Chapter 13 filing and after it attended the meeting of creditors and filed pleadings in the Chapter 13 case.); Flynn v. IRS (In re Flynn), 169 B.R. 1007, 1012, 1014, 1024 (Bankr. S.D. Ga. 1994) (Debtor is entitled to compensatory and punitive damages, including recovery for emotional distress, where IRS levied on bank account notwithstanding actual notice of the Chapter 13 case and the filing of two proofs of claim. Bankruptcy unit of the IRS in Atlanta, Georgia, received notice of the bankruptcy filing. Levy on debtor’s bank account was issued by the IRS office in Jacksonville, Florida, the debtor’s former residence. The IRS admitted that “the collection branch of the Service cannot determine independently, and is not routinely notified when a debtor, who happens not to be the primary taxpayer on a joint tax obligation, files bankruptcy. Despite notice to the Service, in accordance with applicable law, the Service does not notify its internal collection unit, and the result is that it continues its collection efforts.” “[T]he IRS’ actions in sending a notice of levy to Debtor’s bank constituted a willful violation of the automatic stay under section 362(h).” Debtor was awarded compensatory damages for returned check charges of $120, lost wages of $360, and travel expenses of $108.55. Section 362(h) “creates independent federal bankruptcy cause of action which is based exclusively upon a violation of the automatic stay rather than any duty created under state law.” The “impact rule” applicable to analogous tort actions under Georgia law was not applicable. Compensatory damages due to emotional distress in the amount of $5,000 were appropriate because the debtor “was forced to endure the stress of knowing that a number of her checks would bounce and dealing with those payees, the emotional trauma of having to cancel a planned birthday party for her child, and the humiliation of being unable, without considerable difficulty and commotion, to negotiate a check for groceries at her neighborhood supermarket.” Attorney’s fees of $2,709 and punitive damages of $10,000 were awarded. “[T]he IRS maintains that it is incapable or unwilling to develop a system of cross-referencing its files to prevent actions such as the ones in this case from occurring. . . . Its failure to correct known, glaring weaknesses in its internal controls which cause it to repeatedly violate the automatic stay constitutes bad faith, and an arrogant defiance of the majesty of Federal Law which has embodied 11 U.S.C. Section 362 as its ‘fundamental protection’ to debtors in bankruptcy. . . . The IRS’ recalcitrance and indifference to the fact that its current system guarantees that it will repeatedly violate the automatic stay, persuade me that an award of $10,000.00 in punitive damages is appropriate in this case.”); Bush v. NationsBank (In re Bush), 166 B.R. 69, 71–72, 74 (Bankr. W.D. Va. 1994) (Bank violated automatic stay and is liable for compensatory and punitive damages for selling debtor’s truck after the filing. Bank repossessed debtor’s truck on August 31, 1993; debtor filed Chapter 13 on September 17, 1993. Notice of the filing was sent to the bank at its correct address. Debtor valued truck at $7,000; bank sold the truck to dealer for $4,100 on September 22, 1993. “When knowledge of the bankruptcy filing has been communicated to a potential claimant, actions taken in spite of this knowledge are deemed ‘willful’ actions. . . . [N]otice of the filing of Debtor’s petition was mailed. . . . There is a presumption that the posting of a letter to the correct address with proper postage is evidence of delivery. The only evidence of non-delivery is a witness, Mr. Goad, an official with the Bank . . . who denied that he had personally received the notice. There is no evidence before the Court that the notice was not, in fact, delivered to the box number and received by representatives of the Bank and the Court file does not reflect that the notice was returned undelivered. . . . That presumption has not been rebutted. . . . [T]he sale of Debtor’s truck post-petition violated 11 U.S.C. § 362 and Bank is subject to provisions of 11 U.S.C. § 362(h).” The debtor was awarded $7,000, the value of the vehicle; $3,000 additional damages and costs for time and expenses; $1,500 in attorneys’ fees; and, as “sanctions,” “the sum of $5,000.00, $4,000.00 of which shall be suspended upon payment of the foregoing sums in 10 days.”); In re Gault, 136 B.R. 736 (Bankr. E.D. Tenn. 1991) (Debtor is entitled to punitive damages of $2,500 where IRS willfully violated the automatic stay by serving three notices of intent to levy after actual knowledge of bankruptcy and contact from debtor’s attorney.); Smoot v. Southtrust Mobile Servs., Inc. (In re Smoot), 134 B.R. 960 (Bankr. N.D. Ala. 1991) (It was willful violation of the automatic stay entitling debtor to $816.85 actual damages, including lost wages, attorneys’ fees and expenses, and punitive damages of $5,000 where in misguided reliance on Southrust Bank of Alabama v. Thomas (In re Thomas), 883 F.2d 991 (11th Cir. 1989), creditor with an unperfected security interest in mobile home intentionally did not file a proof of claim, did not seek relief from the stay, but proceeded in state court after confirmation to take a money judgment and a judgment for possession.); Coates v. Peachtree Apts. (In re Coates), 108 B.R. 823 (Bankr. M.D. Ga. 1989) (Although municipal court marshal is protected from liability for violation of automatic stay by doctrine of judicial immunity, landlord willfully violated stay by continuing dispossessory proceedings against the debtor. Landlord assessed compensatory damages of $2,331 for loss of work, motel lodging, loss of personal property, and attorneys’ fees.); United Student Aid Funds, Inc. v. Clemmons (In re Clemmons), 107 B.R. 488 (Bankr. D. Del. 1989) (It was willful violation of automatic stay to fail to stop postpetition wage assignment. Creditor’s attorney required to reimburse the debtor for attorneys’ fees and costs.); Littke v. Trust Corp. Mortgage Co. (In re Littke), 105 B.R. 905, 910–11 (Bankr. N.D. Ind. 1989) (It was willful violation of the stay entitling debtor to recover attorneys’ fees and expenses when mortgagee being paid “outside” the plan proceeds with foreclosure based on the debtor’s postconfirmation default but without first seeking relief from the stay. “Erroneous, although good faith, belief concerning the stay will not insulate a party from answering for the consequences of its actions. . . . That [the creditor] may have reached this decision based upon the advice of counsel is no defense.”); In re Davis, 74 B.R. 406 (Bankr. N.D. Ohio 1987) (Investigation, inventory, and removal of property by liquor control commission was prompted by sales tax delinquency and was a postpetition effort at collection of a scheduled debt in violation of the automatic stay. The violation was willful. Commission ordered to pay lost profits, damages, and attorneys’ fees.); In re Shafer, 63 B.R. 194 (Bankr. D. Kan. 1986) (damages and attorneys’ fees); LaTempa v. Long, 58 B.R. 538 (Bankr. W.D. Va. 1986) (compensatory and punitive damages); Hubbard v. Fleet Mortgage Co. (In re Hubbard), 70 B.R. 122 (Bankr. E.D. Ark. 1985) (a fine in the amount of the creditor’s claim, $7,649.80, plus payment of attorneys’ fees of $750).

 

36  See Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265, 268 (1st Cir. 1999) (Foreclosure proceeding in violation of stay included public notice to debtor’s neighbors—debtor awarded $25,000 for emotional distress and attorney fees of $18,220.68. “[E]motional damages qualify as ‘actual damages’ under § 362(h). . . . Kaneb provided specific information about the sharp decline in social invitations and outings following Fleet’s violation of the automatic stay . . . . He then testified about the emotion distress he experienced because of these changes in his life. . . . An honest accounting of actual damages under § 362(h) must include the psychological suffering of this eighty-five year old retired widower.”); Bishop v. U.S. Bank/First Star Bank, N.A. (In re Bishop), 296 B.R. 890, 895–98 (Bankr. S.D. Ga. 2003) (Compensatory damages, including emotional distress damages, awarded against First Star Bank for willful violation of stay when repo agent contacted debtor’s mother to find the debtor and repossessed pickup truck after confirmation with knowledge of the bankruptcy case, and First Star used a law enforcement officer to threaten incarceration. “A bankruptcy court may award damages attributed to emotional distress if a preponderance of the evidence shows that emotional harm occurred and that the defendant’s conduct in willfully violating the stay was the cause of that harm. . . . The agent persisted and wrongfully involved Debtor’s wife, mother, and law enforcement agencies in his unlawful, repeated attempts to flout federal protections . . . . Debtor suffered fear, anguish, and intense personal humiliation because of the interjection of these outside family members and police authorities into a matter they should never have been aware of . . . . Debtor suffered heightened distress over the threat of incarceration. . . . Debtor is entitled to actual damages for emotional distress in the amount of $5,000.00.”); Smith v. Homes Today, Inc. (In re Smith), 296 B.R. 46, 52–62 (Bankr. M.D. Ala. 2003) (“[C]allous, if not brutal” repossession of mobile home with knowledge of Chapter 13 petition justified actual damages for lost wages and emotional distress of $25,000. “‘I came to the front door, the steps were missing. The home was actually moving. I jumped out of a moving home.’ . . . [P]hotographs and home movies of [the debtor’s] deceased son were lost as a result of the forcible and unlawful taking of the mobile home. . . . Smith became homeless, lost her job, suffered from stress and depression and ultimately sought psychiatric treatment. . . . Homes Today violated the automatic stay in a willful and malicious manner, calculated to humiliate Smith and cause her emotional distress.”); Headrick v. Georgia (In re Headrick), 285 B.R. 540, 550 (Bankr. S.D. Ga. 2001) (For stay violation by state of Georgia, “the Headricks are entitled to nominal damages of $200 for the emotional distress and lost pay resulting from the 11 U.S.C. § 362 automatic stay violation.”); In re Shunnarah, 268 B.R. 657, 663 (Bankr. M.D. Fla. 2001) (Repossessing creditor violated automatic stay by refusing to return car after petition; testimony that repossession aggravated wife’s illness and contributed to hospitalization was “insufficient to warrant an award of damages.”); Patterson v. Chrysler Fin. Co. (In re Patterson), 263 B.R. 82 (Bankr. E.D. Pa. 2001) (Chrysler willfully violated automatic stay by refusing to return repossessed car. Debtor failed to prove emotional distress but is entitled to other damages.); In re Johnson, 253 B.R. 857 (Bankr. S.D. Ohio 2000) (Actual damages of $6,669, plus $1,000 for emotional distress, and punitive damages of $1,000 assessed creditor and creditor’s counsel for refusing to release a garnishment, for filing retaliatory motions for sanctions and disciplinary proceedings against the debtors’ attorney and for refusing amicable settlement opportunities offered by debtors’ counsel.); Gullett v. Continental Casualty Co. (In re Gullett), 230 B.R. 321 (Bankr. S.D. Tex. 1999) (Workers’ compensation carrier that willfully violated stay by exercising a disputed recoupment and by continuing to litigate administrative and legal proceedings in state court after the petition in bad faith ordered to pya $30,258 for attorney’s fees, $40,000 as sanctions and $8,619.54 plus interest for overpayments offset by the carrier. Appears to sustain debtor’s claim for emotional distress.); Holden v. United States (In re Holden), 226 B.R. 809 (Bankr. D. Vt. 1998) (Chapter 13 debtor can present evidence of emotional distress as damages for willful violation of stay by IRS.); Diviney v. NationsBank of Tex. (In re Diviney), 211 B.R. 951, 967 (Bankr. N.D. Okla. 1997) (Damages for emotional distress were refused because “[t]he Debtors presented no medical testimony . . . . [T]he only evidence of any emotional distress is found in testimony that conversations between the Bank and the Debtors became heated at times, and that profanity was used.”), aff’d, 225 B.R. 762 (B.A.P. 10th Cir. 1998).

 

37  See In re Parker, 279 B.R. 596, 604 (Bankr. S.D. Ala. 2002) (Sanctions were warranted against IRS for violating automatic stay by letters and notices of levy after the petition but evidence of emotional distress was too general and unsubstantiated: “The courts have not awarded emotional distress damages when the injuries have no medical evidence to support them.”).

 

38  See, e.g., In re Hedetneimi, 297 B.R. 837, 842 (Bankr. M.D. Fla. 2003) (Although bank violated stay by temporarily refusing to cash a check payable to the debtor drawn on a third-party customer’s account, the “humiliation and embarrassment before an audience of other bank customers” claimed by the debtor was supported by no corroborating evidence and was not compensable as emotional distress.); In re Parker, 279 B.R. 596 (Bankr. S.D. Ala. 2002) (IRS sanctioned for postpetition letters and notices of levy, but evidence of emotional distress was too general and unsubstantiated to support a damages award.).

 

39  See Stinson v. Bi-Rite Restaurant Supply, Inc. (In re Stinson), 295 B.R. 109, 122 (B.A.P. 9th Cir. 2003) (BAP affirms award of attorney fees and refusal to retroactively annul stay when creditor took and recorded judgment before entry of order dismissing Chapter 13 case; adopting standard from Pershing Park Villas Homeowners Ass’n v. United Pacific Insurance Co., 219 F.3d 895 (9th Cir. 2000), award of emotional distress damages is reversed and remanded: “[T]o be entitled to emotional distress damages, there must be significant economic loss caused by the willful violation of the automatic stay. . . . Debtor must first show a significant economic loss caused by the stay violation and then establish that his loss caused him emotional injury.”); In re Welch, 296 B.R. 170, 172 (Bankr. C.D. Ill. 2003) (“[T]he Seventh Circuit does not permit recovery for purely emotional injuries under 11 U.S.C. § 362(h).”). But see Bishop v. U.S. Bank/First Star Bank, N.A. (In re Bishop), 296 B.R. 890, 896–98 (Bankr. S.D. Ga. 2003) (“The Court of Appeals for the Seventh Circuit held in Aiello v. Providian Financial Corp., 239 F.3d 876 (7th Cir. 2001), that a debtor may not be awarded damages for emotional injury asserted as actual damages under § 362(h) unless that debtor also suffered an identifiable financial loss upon which to ‘piggyback’ an emotional distress claim. . . . I respectfully disagree . . . . [E]motional distress damages are ‘actual damages’ . . . . [E]motional distress is an actual harm that qualifies for an award of actual damages under § 362(h) without regard to the existence of other damages. . . . [M]ental distress was precisely the effect on Debtor that the repo agent intended. . . . Debtor is entitled to actual damages for emotional distress in the amount of $5,000.00.”).

 

40  See, e.g., In re Hedetneimi, 297 B.R. 837 (Bankr. M.D. Fla. 2003) (Bankruptcy court can award attorney fees pursuant to § 362(h) even when the debtor has suffered no other compensatory harm; but because the debtor was represented pro bono by Central Florida Legal Services, fees were not appropriate.); Mauck v. C-Bass Mortgage Loan Buyout Trust 2000-A (In re Mauck), 287 B.R. 219 (Bankr. E.D. Mo. 2002) (Noticing a foreclosure sale was a willful violation of the automatic stay for which an award of attorney’s fees under § 362(h) is appropriate.); In re Shunnarah, 268 B.R. 657 (Bankr. M.D. Fla. 2001) (Debtor entitled to attorney’s fees of $875 when repossessing creditor violated automatic stay by refusing to return cars after petition notwithstanding that debtors’ evidence of other damages for alternative transportation and aggravation of an illness was not sufficient.); In re Miklas, 265 B.R. 312 (Bankr. M.D. Fla. 2001) (Creditor violated automatic stay by filing civil action in U.S. district court, but because the summons was never served on the debtors, the only damages compensable in the Chapter 13 case are attorney fees.); In re Halas, 249 B.R. 182 (Bankr. N.D. Ill. 2000) (Default judgment in violation of the automatic stay is void; debtor is entitled to attorneys’ fees and the return of garnished funds.); In re Draper, 237 B.R. 502, 504 (Bankr. M.D. Fla. 1999) (Although debtor had no actual damages, court awarded $1,020 for attorneys’ fees when mortgage holder mailed invoices demanding payment notwithstanding typewritten message, “Our records indicate that you filed bankruptcy, therefore, this statement is sent to you for information purposes only and does not alter or effect [sic] the terms of your bankruptcy proceedings.”); Singley v. American Gen. Fin. (In re Singley), 233 B.R. 170, 174 (Bankr. S.D. Ga.) (“[A]ttorney fees are recoverable as damages under section 362(h) for a willful violation of the automatic stay even if the debtor has suffered no other compensable harm.”), on reconsideration, 236 B.R. 105 (Bankr. S.D. Ga. 1999); In re Nowell, 232 B.R. 370 (Bankr. S.D. Ohio 1999) (Actual damages including costs and attorneys’ fee when lender that repossessed car before the petition and contracted to sell the car before the petition transferred title to buyer after actual knowledge of Chapter 13 filing.).

 

41  See § 76.1 [ What Court? ] § 62.2  What Court?.

 

42  Section 113 of the 1994 Act amended 11 U.S.C. § 106 to broadly abrogate sovereign immunity with respect to a long list of Bankruptcy Code sections, including the automatic stay in 11 U.S.C. § 362. The 1994 Act empowered bankruptcy courts to “issue against a governmental unit an order, process, or judgment . . . including an order or judgment awarding a money recovery, but not including an award of punitive damages.” 11 U.S.C. § 106(a)(3), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 113, 108 Stat. 4106 (1994). To the extent that § 106 now presumes to waive the Eleventh Amendment or sovereign immunity of states, recent Supreme Court cases strongly suggest that § 106 is unconstitutional. See below in this section, and see § 76.1 [ What Court? ] § 62.2  What Court?.

 

43  See, e.g., Alabama Dep’t of Human Resources v. Lewis, 279 B.R. 308 (S.D. Ala. 2002) (Although Alabama Department of Human Resources may have violated automatic stay by garnishing Chapter 13 debtor’s wages, Eleventh Amendment bars bankruptcy court action for contempt and sanctions.); In re Martinez, 196 B.R. 225, 229–30 (D.P.R. 1996) (Although Department of Treasury violated the automatic stay by filing a tax lien on a debtor’s property after a Chapter 13 petition, because Treasury did not file a proof of claim, the commonwealth has not waived sovereign immunity under § 106(a), as amended in 1994. “Congress unequivocally requires that the governmental unit file a proof of claim in the bankruptcy case before the bankruptcy court may deem that the governmental unit waived its right to sovereign immunity. . . . Treasury did not file a proof of claim in debtors’ bankruptcy case. . . . Treasury did not waive its claim to sovereign immunity, and it is not amenable to suit for willful violation of the stay.”); King v. Florida Dep’t of Revenue (In re King), 280 B.R. 767 (Bankr. S.D. Ga. 2002) (On remand, because § 106(a) is unconstitutional, state of Florida has immunity to debtor’s complaint for violation of the stay based on intercept of tax refund to collect child support.); Bozeman v. Florida Dep’t of Revenue (In re Bozeman), 278 B.R. 275 (Bankr. M.D. Ga. 2002) (Eleventh Amendment immunity bars suit against Florida Child Support Enforcement Office for intercept of debtors’ tax refund; Florida did not waive Eleventh Amendment immunity by participating in federal intercept program.); In re Price, 179 B.R. 209 (Bankr. E.D. Cal. 1995) (Although district attorney willfully violated automatic stay by continuing to accept payments under prepetition wage assignment for the collection of child support arrearages, the state did not file a proof of claim and thus did not waive sovereign immunity with respect to monetary damages. Section 106(c) waived sovereign immunity for declaratory and injunctive relief only.); In re Jones, 164 B.R. 543 (Bankr. N.D. Tex. 1994) (Post-discharge notice and levy on bank accounts were violations of the automatic stay that, but for sovereign immunity, would have been remedied with compensatory damages and attorneys’ fees. However, IRS did not waive sovereign immunity because the claim it filed 21 months late was not effective as an attempt to collect from estate assets, and thus the purposes underlying § 106(a) were not implicated. The debtor’s claim for violation of the stay arose after entry of discharge and belongs to the debtor, not to the estate. 26 U.S.C. § 7430 would entitle a Chapter 13 debtor to attorneys’ fees for violation of the automatic stay by the IRS if the debtor complied with prerequisites of that statute. One of those prerequisites is exhaustion of administrative remedies. The debtor did not exhaust administrative remedies and is not entitled to fees under § 7430.); Leber v. Illinois Dep’t of Revenue (In re Leber), 134 B.R. 911 (Bankr. N.D. Ill. 1991) (Willfulness cannot be resolved on motion for summary judgment when relevant facts are contested. Hoffman v. Connecticut Dep’t of Income Maintenance, 492 U.S. 96, 109 S. Ct. 2818, 106 L. Ed. 2d 76 (1989), does not authorize a Chapter 13 debtor to recover attorneys’ fees or costs when a state may have acted in violation of the automatic stay by attempting to collect a discharged tax claim.).

 

44  See, e.g., Wyoming Dep’t of Trans. v. Straight (In re Straight), 143 F.3d 1387, 1389–90 (10th Cir. 1998) (Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S. Ct. 1114, 134 L. Ed. 2d 252 (1996), and Eleventh Amendment immunity do not bar Chapter 13 debtor’s recovery of fees and costs caused by Wyoming Department of Transportation’s revocation of the debtors’ “disadvantaged business” certificate in violation of §§ 362 and 525 because other departments of Wyoming state government filed proofs of claim for unpaid bonding and payroll obligations arising out of same transactions. Citing Gardner v. New Jersey, 329 U.S. 565, 67 S. Ct. 467, 91 L. Ed. 504 (1947), “[w]hen the State becomes the actor and files a claim against the [bankruptcy] fund, it waives any immunity which it otherwise might have had respecting the adjudication of the claim.”); Carlin v. Rogers District Court (In re Carlin), 274 B.R. 821, 824 (Bankr. W.D. Ark. 2002) (In an adversary proceeding for sanctions for violation of the automatic stay, “In addition to finding that Rogers District Court and Bentonville District Court are political subdivisions of municipalities and not entitled to Eleventh Amendment immunity, Rogers District Court waived any immunity to which it may otherwise have been entitled when it filed its proof of claim in the debtors’ bankruptcy case.”); In re Layton, 220 B.R. 508 (Bankr. N.D.N.Y. 1998) (County waived sovereign immunity by filing a proof of claim for school taxes and violated stay by sending demand notices and refusing to accept payment of postpetition taxes unless the debtor also pay prepetition taxes. Debtor entitled to attorney fees of $500 but no punitive damages.); Flynn v. IRS (In re Flynn), 169 B.R. 1007 (Bankr. S.D. Ga. 1994) ($10,000 in punitive damages were awarded against IRS in Chapter 13 case in which IRS levied on debtor’s bank account notwithstanding actual notice of the Chapter 13 case and the filing of two proofs of claim. IRS was found to have waived sovereign immunity under § 106(b).).

 

45  See In re Price, 179 B.R. 209 (Bankr. E.D. Cal. 1995) (Although district attorney willfully violated automatic stay by continuing to accept payments under prepetition wage assignment for the collection of child support arrearages, the state did not file a proof of claim and thus did not waive sovereign immunity with respect to monetary damages. Section 106(c) waived sovereign immunity for declaratory and injunctive relief. District attorney was ordered to cease collection action where confirmed plan provided for full payment of arrearages.).

 

46  See United States v. Nordic Village, Inc., 503 U.S. 30, 112 S. Ct. 1011, 117 L. Ed. 2d 181 (1992); Hoffman v. Connecticut Dep’t of Income Maintenance, 492 U.S. 96, 109 S. Ct. 2818, 106 L. Ed. 2d 76 (1989).

 

47  11 U.S.C. § 106(a) (emphasis added) (prior to amendment in 1994).

 

48  See, e.g., Flynn v. IRS (In re Flynn), 169 B.R. 1007, 1019 (Bankr. S.D. Ga. 1994) (“[U]se of the word ‘any’ as the sole modifier of or limitation upon the term ‘claim’ evinces an intent on the part of Congress to extend the waiver of immunity in sections 106(a) and 106(b) to all monetary claims, including those based upon punitive damages under section 362(h).”).

 

49  11 U.S.C. § 106(a), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 113, 108 Stat. 4106 (1994).

 

50  11 U.S.C. § 101(27). See 140 Cong. Rec. H10,766 (section-by-section analysis by Congressman Brooks) (“[T]his amendment expressly provides for a waiver of sovereign immunity by governmental units with respect to monetary recoveries as well as declaratory and injunctive relief. It is the committee’s intent to make § 106 to conform to the Congressional intent of the Bankruptcy Reform Act of 1978 waiving the sovereign immunity of the States, and the Federal Government in this regard.”) (emphasis added). As discussed below, the waiver of sovereign immunity by the federal government on behalf of all state governments is of doubtful constitutionality.

 

51  See Hardy v. United States (In re Hardy), 97 F.3d 1384 (11th Cir. 1996) (The unequivocal waiver of sovereign immunity in revised § 106 permits a Chapter 13 debtor to seek coercive, nonpunitive damages, including attorney fees consistent with the maximum allowable under the Equal Access to Justice Act, for the IRS’s violation of the discharge injunction.).

 

52  11 U.S.C. § 106(a)(3), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 113, 108 Stat. 4106 (1994). See, e.g., Headrick v. Georgia (In re Headrick), 285 B.R. 540, 545 (Bankr. S.D. Ga. 2001) (“Georgia willfully violated the automatic stay of 11 U.S.C. § 362 by sending the Headricks the collection notice . . . . Because Georgia is a governmental unit whose sovereign immunity was abrogated by 11 U.S.C. § 106(a), damages are limited by 11 U.S.C. § 106(a)(3), which prohibits punitive damages.”).

 

53  11 U.S.C. § 106(a)(3), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 113, 108 Stat. 4106 (1994).

 

54  28 U.S.C. § 2412(d)(2)(A). See, e.g., Moulton v. IRS (In re Moulton), 187 B.R. 758, 760 (Bankr. M.D. Fla. 1995) (IRS violated the permanent injunction in § 524(a)(2) by attempting to collect taxes that were discharged in a completed Chapter 13 case. The 1994 amendments to § 106 limit recovery of attorneys’ fees to the amount specified in 28 U.S.C. § 2412(d)(2)(A): attorneys’ fees shall not be awarded in excess of (then) $75 per hour “unless the court determines that an increase in the cost of living or special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee.” Departure from the per-hour maximum requires an evidentiary hearing.).

 

55  If the governmental unit involved is the IRS, further restrictions on sanctions may apply under 26 U.S.C. § 7433. See below in this section.

 

56  Price v. United States (In re Price), 42 F.3d 1068 (7th Cir. 1994) (Bankruptcy court correctly found that the IRS violated the automatic stay by sending a computer-generated notice of intent to levy. IRS waived sovereign immunity under prior version of § 106 and under § 106, as amended in 1994. Because lower courts calculated fees and costs based on prior law, calculation of sanctions must be remanded for recalculation consistent with 28 U.S.C. § 2412(d)(2)(A).). Accord Hardy v. United States (In re Hardy), 97 F.3d 1384 (11th Cir. 1996) (Attorneys’ fees for the IRS’s violation of the discharge injunction are limited to the maximum allowable under the Equal Access to Justice Act.); Moulton v. IRS (In re Moulton), 187 B.R. 758 (Bankr. M.D. Fla. 1995) (The 1994 amendments to § 106 limit attorneys’ fees to the amount specified in 28 U.S.C. § 2412(d)(2)(A): attorneys’ fees shall not be awarded in excess of (then) $75 per hour unless the court determines otherwise after an evidentiary hearing.).

 

57  Headrick v. Georgia (In re Headrick), 285 B.R. 540, 545–50 (Bankr. S.D. Ga. 2001) (For stay violation by state of Georgia, attorney fees of $38,502.23 were awarded. “Because Georgia is a governmental unit whose sovereign immunity was abrogated by 11 U.S.C. § 106(a), damages are limited by 11 U.S.C. § 106(a)(3), which . . . states that an ‘order or judgment for costs or fees . . . against any governmental unit shall be consistent with the provisions and limitations of section 2412(d)(2)(A) of title 28’ . . . which is part of the Equal Access to Justice Act . . . . While the EAJA limits the award of attorney fees to $125 per hour, the court may determine ‘that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee.’ . . . [T]he EAJA does allow for increases resulting from inflation from the day the statutory rate was set. . . . Mr. Bederman may recover his $250 per hour rate because of his specialized knowledge of Eleventh Amendment sovereign immunity issues. . . . [T]he Supreme Court has noted that expert knowledge in a specialized area of law can justify an award higher than that established by the EAJA. . . . While bankruptcy law is not a specialized area of the law justifying a higher rate, expertise in Eleventh Amendment sovereign immunity is.”).

 

58  517 U.S. 44, 116 S. Ct. 1114, 134 L. Ed. 2d 252 (1996). See Karen Cordry, Tale of Two Sovereigns: Will the Bankruptcy Code Survive Seminole, 5 Norton Bankr. L. Adviser 1 (1996); Russell Dees, Seminole and Sovereign Immunity: It’s Worse Than You Thought, 9 Norton Bankr. L. Adviser 1 (1996); Karen Cordry, Seminole, Sovereign Immunity and the Supremacy Clause: The Sky Isn’t Necessarily Falling, 12 Norton Bankr. L. Adviser 5 (1996). See also 1 Norton Bankr. L. & Prac. 2d § 4.20, at 20 (Supp. Nov. 1996).

 

59  Alden v. Maine, 527 U.S. 706, 119 S. Ct. 2240, 144 L. Ed. 2d 636 (1999); College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 119 S. Ct. 2219, 144 L. Ed. 2d 605 (1999); Florida Prepaid Postsecondary Educ. Expense Bd. v. College Sav. Bank, 527 U.S. 627, 119 S. Ct. 2199, 144 L. Ed. 2d 575 (1999).

 

60  See § 76.1 [ What Court? ] § 62.2  What Court?. See, e.g., Alabama Dep’t of Human Resources v. Lewis, 279 B.R. 308 (S.D. Ala. 2002) (Although Alabama Department of Human Resources may have violated automatic stay by garnishing Chapter 13 debtor’s wages, Eleventh Amendment bars bankruptcy court action for contempt and sanctions.); In re Martinez, 196 B.R. 225, 229–30 (D.P.R. 1996) (In Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S. Ct. 1114, 134 L. Ed. 2d 252 (1996), “the Supreme Court specifically found § 106 of the Bankruptcy Code, as it purports to apply to governmental units of State and Commonwealth governments, an unconstitutional violation of States’ right to sovereign immunity protected by the Eleventh Amendment. . . . Therefore, the Bankruptcy Court lacks jurisdiction over debtors claim against Treasury for willful violation of the automatic stay.”); King v. Florida Dep’t of Revenue (In re King), 280 B.R. 767 (Bankr. S.D. Ga. 2002) (Because § 106(a) is unconstitutional, state of Florida has immunity to debtor’s complaint for violation of the stay based on intercept of tax refund to collect child support.); Bozeman v. Florida Dep’t of Revenue (In re Bozeman), 278 B.R. 275 (Bankr. M.D. Ga. 2002) (Eleventh Amendment immunity bars suit against Florida Child Support Enforcement Office for intercept of debtors’ tax refund; Florida did not waive Eleventh Amendment immunity by participating in federal intercept program.); In re Burkhardt, 220 B.R. 837 (Bankr. D.N.J. 1998) (Reaffirming In re Perez, 220 B.R. 216 (Bankr. D.N.J. 1998), motion to require the New Jersey Division of Motor Vehicles to restore driver’s license suspended for motor vehicle violations is barred by Eleventh Amendment immunity, whether it sounds in violation of the stay under § 362 or the prohibition against discrimination in § 525.).

 

61  See Richard Lieb, States’ Rights under the Supreme Court’s View of Federalism, as Applied to the Eleventh Amendment, 8 Norton Bankr. L. Adviser 1 (1999); Karen Cordry, Everything I Know about Federalism I Learned in the Seventh Grade (Pt. 1), 9 Norton Bankr. L. Adviser 1 (1999); Karen Cordry, Everything I Know about Federalism I Learned in the Seventh Grade (Pt. 2), 10 Norton Bankr. L. Adviser 1 (1999).

 

62  Pub. L. No. 105-206, 112 Stat. 685 (1998).

 

63  26 U.S.C. § 7433(e)(1).

 

64  26 U.S.C. § 7433(e)(2)(A).

 

65  See 26 U.S.C. § 7433(b), (d)(1).

 

66  Administrative and litigation costs are broadly defined in 26 C.F.R. § 301.7433-1(b)(2)(i) to include court costs, witness fees and attorneys’ fees.

 

67  See cases collected above in this section.

 

68  In re Parker, 279 B.R. 596, 604–06 (Bankr. S.D. Ala. 2002).