§ 62.1 — Examples of Stay Violations, and Not

Revised: May 24, 2004

[1]

Almost any postpetition action by a creditor to collect a prepetition debt, enforce a lien or obtain possession of property from the estate or from the debtor violates the automatic stay. It does not matter how polite the creditor is, nor does it matter that the creditor has not yet received formal notice of the Chapter 13 filing. It is at least a technical violation of the stay to take collection action after the petition even though actual notice or knowledge comes later.1 The filing of proofs of claim and the litigation of claims allowance in the Chapter 13 case are safe forms of creditor collection action after the petition.2

[2]

It is a violation of the stay for a creditor to pressure the debtor for payment, make demand for payment or threaten collection action.3 That “the computer did it” does not excuse demand letters and account statements that violate the automatic stay.4 Commencement or continuation of any legal action to collect debt from the debtor in state or federal court is a violation of the stay, and any action or judgment taken is void or voidable.5 Recording or attempting to perfect a lien after the petition is a violation of the stay.6

[3]

In Chapter 13 cases filed before October 22, 1994, a taxing authority can issue a notice of tax deficiency7 but cannot assess taxes or penalties after the petition without violating the automatic stay.8 A postpetition levy by a taxing authority violates the automatic stay and is not effective to encumber property of the Chapter 13 estate.9 A tax sale or recording of a tax deed after the Chapter 13 petition is a violation of the stay and is void.10

[4]

It is a violation of the stay for a creditor to repossess property from a Chapter 13 debtor after the petition.11 Use of a state court to help a creditor regain possession of property from the debtor is a violation of the automatic stay.12 The sale of repossessed collateral after a Chapter 13 petition has been held to be a violation of the stay and void even though the creditor had no notice of the stay; the proceeds of the sale were ordered returned to the estate.13 A creditor injured by the postpetition sale of its collateral in violation of the automatic stay has standing to seek damages from the creditor that violated the automatic stay.14

[5]

Use of criminal process to coerce debt repayment can be a violation of the automatic stay.15

[6]

Continuation of an action by a landlord to dispossess the debtor is a violation of the stay.16 It is a violation of the stay for a creditor to fail to stop a garnishment, wage assignment or “automatic” loan payment.17 The Postal Service violated the automatic stay by deducting a $50 administrative fee from income it withheld from a Chapter 13 debtor’s salary pursuant to an income deduction order in a Chapter 13 case.18 One creditor violated the automatic stay by refusing the Chapter 13 trustee’s repeated demands for turnover of car insurance proceeds.19 It is a violation of the automatic stay for a creditor to levy upon a nondebtor spouse’s income after the filing of a Chapter 13 petition when the debtor resides in a community property state and the debtor and the nonfiling spouse are both liable to the levying creditor.20 A bank cannot debit a debtor’s bank account after the petition for repayment of a debt despite the bank’s belief that it has the debtor’s permission.21 Although not without controversy, it has been held that a university violated the automatic stay by refusing to release a debtor’s academic transcript because of an unpaid student loan.22

[7]

There is controversy whether a creditor violates the automatic stay by refusing to return property repossessed before the Chapter 13 petition. The better reasoned decisions, many citing United States v. Whiting Pools, Inc.,23 have concluded that collateral repossessed before the petition but not disposed of remains property of the estate24 and is subject to turnover under § 542,25 and the creditor that refuses the debtor’s demand for return violates the automatic stay.26 On various theories, other courts hold that it is not a violation of the stay for a creditor to refuse to deliver collateral repossessed before the Chapter 13 petition.27 Some of these courts find that the repossessed collateral is not property of the Chapter 13 estate.28 Others find no stay violation because the creditor’s adequate protection right trumps the debtor’s right to possession.29 Still other courts relieve the creditor of any stay violation based on doubts about the Chapter 13 debtor’s right to turnover under § 542.30 When continued possession of the collateral is necessary for perfection of the creditor’s lien—for example, when the creditor is an auto mechanic and the debtor has not paid for car repairs—some courts cite the exception to the stay in § 362(b)(3) and its correlative protection from avoidance powers in § 546(b) to excuse the creditor’s retention of estate property.31

[8]

There is no easy reconciliation of these cases. Creditors are not safe in this uncertain area of Chapter 13 practice. Upon demand for turnover by a Chapter 13 debtor, a creditor in possession of collateral repossessed before the petition minimizes or avoids sanctions for violating the stay by (1) negotiating an immediate return of the collateral to the debtor based on an agreed order for adequate protection; or (2) delivering possession of the collateral to the debtor or trustee32 while simultaneously moving for relief from the stay and for adequate protection. In more desperate circumstances, when the creditor is truly concerned about the safety of its collateral, an ex parte motion for emergency stay relief under § 362(f)33 may be appropriate.

[9]

Simply refusing the debtor’s demand and taking no other action—the “come and get me” strategy—is almost certain to provoke a motion for sanctions that will be costly without regard to who ultimately wins possession of the collateral.

[10]

Foreclosure sales are a lightning rod for stay violations. Obtaining a foreclosure judgment, noticing or conducting a foreclosure sale, confirming a foreclosure sale, recording a deed or deficiency judgment after a foreclosure sale—almost any postpetition action in furtherance of foreclosure—has produced a stay violation in a Chapter 13 case.34 It is a violation of the stay for a mortgage company to proceed with foreclosure based on a debtor’s postpetition default without first seeking relief from the stay, notwithstanding that the debtor is paying the mortgage company directly.35 Recording a deed in lieu of foreclosure violates the stay.36 Exercising a “call” provision in a note during a Chapter 13 case as a predicate to acceleration and foreclosure is a violation of the stay.37

[11]

There is developing case law addressing how a mortgage holder or servicer must maintain its records and handle payments from a Chapter 13 debtor to avoid violating the stay. The relationship between Chapter 13 debtors and their mortgage companies varies greatly from district to district and even from case to case within a district. As detailed elsewhere,38 sometimes home mortgages and arrearages are paid through the Chapter 13 trustee; sometimes the debtor will make postpetition payments directly to the mortgage holder, and sometimes only prepetition arrearages are paid through the Chapter 13 trustee. Depending on the rule in the circuit and the content of the plan, confirmation may affect whether mortgaged property remains property of the Chapter 13 estate and whether payments by the debtor to the mortgage holder are property of the estate protected by the automatic stay after confirmation.39 In any case, there is a long-term relationship between the debtor and the mortgage holder during the Chapter 13 case that is littered with opportunities for stay transgression.

[12]

With respect to maintaining records after the petition, the U.S. Court of Appeals for the First Circuit in Mann v. Chase Manhattan Mortgage Corp.40 held that a mortgage holder did not violate the automatic stay by accruing postpetition attorneys’ fees on its internal records. In Mann, Chase Mortgage filed a claim for prepetition attorneys’ fees and continued to accrue postpetition attorneys’ fees on its computer account for the debtor. Chase did not file a claim or give notice to the debtor with respect to the postpetition fees. When the debtor found out about the accruing fees and challenged Chase’s practices, the First Circuit found no foul:

[U]nilateral accruals of amounts assertedly due, but in no manner communicated to the debtor, the debtor’s other creditors, the bankruptcy court, nor any third party, plainly are not the sort of “act” Congress sought to proscribe. . . . [A]bsent any overt attempt by Chase to recover these fees from the chapter 13 estate in the future . . . the Chase bookkeeping entries represent mere unilateral notations regarding attorney fees which it assertedly incurred, thereby according it no identifiable legal advantage over other creditors. . . . [T]hese postpetition entries do indeed pose the prospect that the amount due Chase, hence subject to its security interest, may increase. Nevertheless, a mere potentiality of future liability reasonably cannot be considered the “creation” of a new and enlarged lien.41
[13]

Chapter 13 debtors often arrive at the completion of payments under the plan only to discover that their home mortgage is in default and a foreclosure is the reward for years of successful performance under the plan.42 If mortgage holders can silently accrue postpetition charges without violating the automatic stay, debtors must invent new procedures to protect themselves from accruals and defaults during the Chapter 13 case.43

[14]

It has been held that it is a violation of the stay for a mortgage company to unilaterally increase the monthly payment due on a home mortgage after the debtor completed payments under the plan when the mortgage holder failed to accurately account for payments by the debtor during the Chapter 13 case.44 In contrast, in Telfair v. First Union Mortgage Corp.,45 the U.S. Court of Appeals for the Eleventh Circuit held that a mortgage holder did not violate the automatic stay after confirmation when it applied monthly payments to reimbursement of fees and expenses for the filing of postconfirmation motions for relief from the stay and for the “force writing” of insurance. The Eleventh Circuit reasoned that postconfirmation mortgage payments directly by the debtor to the mortgage holder ceased to be property of the Chapter 13 estate when received and the creditor could apply those payments pursuant to contract and state law without violating any provision of § 362(a).

[15]

Telfair goes substantially further than Mann to carve away the ordinary protections of the automatic stay in Chapter 13 cases. It is one thing to “accrue” liabilities on the books of the mortgage holder—bad for debtors, especially when the entries are secret debts that will ambush the debtor at the end of the case—but accruing is not collecting. Telfair tells mortgage holders to have at it: when the debtor makes payments directly to the creditor, there is no stay to stop collection of contract advances out of the incoming stream of money from the debtor.

[16]

There is a fundamental weakness in the logic of Telfair. The automatic stay prohibits collection actions not just with respect to property of the estate, but also from property of the debtor when the claim arose before the petition.46 Fees, costs and force written insurance are claims based on the prepetition mortgage contract that were contingent, and perhaps unmatured, at the petition, but these claims arose from the prepetition relationship and are not postpetition debts any more than the future monthly payments of principal and interest. The mortgage holder in Telfair violated the stay when it unilaterally collected contract fees and expenses from property of the debtor. The Eleventh Circuit reasoned around this attribute of the stay and threw Chapter 13 debtors to the wolves in the process. Telfair is a sound reason to always pay mortgages through the Chapter 13 trustee and to always preserve the Chapter 13 estate at confirmation.47

[17]

With respect to notices to the debtor, one reported decision holds that a mortgage holder ordinarily must get relief from the stay before it contacts the debtor about defaults in payments during the Chapter 13 case; however, because the debtor is not damaged by notice of a postpetition default, contact by the creditor is not sanctionable.48 Ironically, another court has held that, because it is not a violation of the stay for a mortgage holder to give notice to the debtor of advances for taxes and insurance escrow deficiencies during the Chapter 13 case, the mortgage holder’s failure to give notice waived its right to collect postpetition advances from the debtor.49

[18]

The automatic stay and the power to avoid unauthorized postpetition transfers in § 549 have a confusing interaction in a Chapter 13 case when a mortgage foreclosure occurs after the petition. A postpetition mortgage foreclosure without permission of the bankruptcy court violates the automatic stay and is void or voidable by the debtor.50 An unauthorized mortgage foreclosure is also a postpetition transfer of property of the Chapter 13 estate that can be avoided under § 549.51 However, § 549(c) contains an exception when notice of the Chapter 13 case has not been recorded in public records and the purchaser is otherwise uninformed:

(c) The trustee may not avoid under subsection (a) of this section a transfer of real property to a good faith purchaser without knowledge of the commencement of the case and for present fair equivalent value unless a copy or notice of the petition was filed, where a transfer of such real property may be recorded to perfect such transfer, before such transfer is so perfected that a bona fide purchaser of such property, against whom applicable law permits such transfer to be perfected, could not acquire an interest that is superior to the interest of such good faith purchaser.52
[19]

There is no cross-reference in § 549 to the automatic stay or in § 362 to the limit on the avoidance of unauthorized postpetition transfers in § 549(c). But both sections seem to apply when an unauthorized mortgage foreclosure occurs after the petition in a Chapter 13 case. Chapter 13 debtors rarely record a notice of filing in the real estate records. It is quite common for Chapter 13 debtors who own real estate to be in the midst of a foreclosure at the filing of the petition. When the mortgage holder completes the foreclosure after the petition, the automatic stay cases tell us that the foreclosure is void or voidable. But what happens to the purchaser at the foreclosure sale? If the purchaser gave fair value and was without knowledge of the Chapter 13 case, does the voiding of the foreclosure sale void the transfer of property to the purchaser without the use of the avoiding power in § 549? Or does § 549(c) protect the purchaser without notice even though the foreclosure sale itself is voided?

[20]

The reported decisions on the interaction of the automatic stay and § 549(c) in Chapter 13 cases are in disarray. Some cases hold that a foreclosure sale in violation of the automatic stay is void or voidable without resort to § 549 and thus without consideration of the exception in § 549(c).53 Other courts have held that even though a foreclosure sale after the filing of a Chapter 13 case is void, if the purchaser gave fair value without notice and in good faith, the purchase is preserved by § 549(c).54 One court held that § 549(c) protects the innocent purchaser at a foreclosure sale after the petition in a Chapter 13 case, but others who participated with knowledge of the filing willfully violated the automatic stay.55 By yet another approach, one court held that it was appropriate to annul the stay retroactively to validate a foreclosure sale in violation of the automatic stay because the purchaser was protected by § 549(c).56

[21]

These cases are more than a little bit confusing. What does it mean that the foreclosure sale is void, but the rights of the purchaser are not upset? If the sale itself was voided as a remedy for the stay violation, why would the bankruptcy court annul the stay retroactively based on an exception to an avoiding power that is not used by the debtor? On the other hand, where is the evidence that Congress intended the exception to the avoidance of unauthorized postpetition transfers to be inapplicable when the unauthorized postpetition transfer was also a violation of the automatic stay? If § 549(c) is an exception to the ordinary voiding effect of the automatic stay with respect to an unauthorized postpetition foreclosure sale, then there is a substantial incentive for mortgage holders to complete foreclosure sales, when the debtor has not recorded in compliance with § 549(c) and the purchaser is innocent. The possibility that § 549(c) will be interpreted as an exception to the voiding remedy for violation of the automatic stay puts a premium on the recording of written notice of the petition by Chapter 13 debtors who own real estate that is in foreclosure at the petition.

[22]

Even if § 549(c) can be a defense to violating the stay, the purchaser is entitled to its protection only if “present fair equivalent value” was given for the postpetition transfer. These words in § 549(c) are important because the most likely context for the § 549(c) argument in a Chapter 13 case is a postpetition foreclosure sale. The purchaser at the foreclosure sale will contend that the price paid at a regularly conducted foreclosure sale is present fair equivalent value for § 549(c) purposes. The analogous argument was accepted by the Supreme Court in BFP v. Resolution Trust Corp.57 when a foreclosure sale was attacked as a fraudulent conveyance under § 548.

[23]

But as carefully analyzed by the bankruptcy court in Ford v. Loftin (In re Ford),58 a fraudulent conveyance under § 548(a)(1)(B) is measured against the “reasonably equivalent value” standard—a different test from the present fair equivalent value in § 549(c). In Ford, the court concluded that “‘present fair equivalent value’ is considerably more exacting than ‘reasonably equivalent value’” and thus the presumption recognized by the Supreme Court in BFP—that a regularly conducted foreclosure sale is “reasonably equivalent value”—does not apply when the purchaser at a foreclosure sale alleges present fair equivalent value for § 549(c) purposes.

[24]

Section 549(c) protects good-faith purchasers after the commence-ment of a Chapter 13 case; the flip side of § 549(c) is the protection of transferors in § 542(c). An entity that “has neither actual notice nor actual knowledge of the commencement of the case . . . may transfer property of the estate . . . in good faith . . . to an entity other than the trustee, with the same effect as to the entity . . . as if the case under this title concerning the debtor had not been commenced.”59 Although not ideally worded, § 542(c) contemplates that a good-faith transferor is protected from both turnover and from violating the automatic stay. It has been held that § 542(c) protects a creditor in possession of property repossessed before the petition when the creditor sells the property after the petition without notice or knowledge of the Chapter 13 filing.60 However, § 542(c) is limited to transferors: one bankruptcy court held that § 542(c) is not a defense to violation of the automatic stay when the purchaser at a prepetition tax sale sought a tax deed after the Chapter 13 petition.61

[25]

The Code is clearer about the automatic stay and postpetition acts to perfect or continue perfection of a lien. Section 362(b)(3) excepts from the automatic stay “any act to perfect, or to maintain or continue the perfection of an interest in property to the extent that the trustee’s rights and powers are subject to such perfection under section 546(b) of this title.”62 Section 546(b) provides:

The rights and powers of a trustee under sections 544, 545 and 549 of this title are subject to any generally applicable law that—
(A) permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection; or
(B) provides for the maintenance or continuation of perfection of an interest in property to be effective against an entity that acquires rights in such property before the date on which action is taken to effect such maintenance or continuation.63
[26]

The first circumstance in § 546(b)(1)(A) appears in reported Chapter 13 cases when state law permits perfection of a transaction to relate back to a date before the petition. For example, in Bebensee-Wong v. Federal National Mortgage Ass’n (In re Bebensee-Wong),64 California law provided that a trustee’s deed, if recorded within 15 days of a sale, relates back and is deemed perfected on the actual date of the sale. Accordingly, the recording of a trustee’s deed 14 days after a foreclosure sale and two days after the Chapter 13 petition did not violate the automatic stay.65

[27]

The second provision in § 546(b)(1)(B) is illustrated when continued possession of estate property is necessary to perfect a lien under state law. For example, in Boggan v. Hoff Ford, Inc. (In re Boggan),66 a repairman with a possessory lien on the debtor’s car refused to return the car. The Bankruptcy Appellate Panel for the Ninth Circuit first consulted state law to determine that “the mechanic’s lien is superior and prior to any security interest in the car obtained after the commencement of the repairs as long as the mechanic maintains perfection by not voluntarily surrendering possession of the car.” 67 Applying § 546(b)(1)(B), the mechanic did not violate the automatic stay because retaining possession was necessary to maintain perfection of its lien on the debtor’s car.

[28]

Several courts in the Ninth Circuit wrestled the question whether postponement of a nonjudicial foreclosure sale after confirmation of a Chapter 13 plan violated the automatic stay.68 In Peters v. Mason-McDuffie Mortgage Corp. (In re Peters),69 a mortgage holder sought relief from the stay based on postconfirmation defaults in payments by the debtor. A prepetition foreclosure sale was interrupted by the Chapter 13 petition. After the petition, the mortgage holder continued the foreclosure sale by public announcement. The debtor defended the postconfirmation request for relief from the stay by arguing that the mortgage holder violated the stay by continuing its foreclosure sale during the Chapter 13 case.

[29]

The bankruptcy court found no violation of the automatic stay and ordered the debtor to provide adequate protection with respect to the postconfirmation defaults in payments. On appeal, the Bankruptcy Appellate Panel for the Ninth Circuit held that postponement of the nonjudicial foreclosure sale after confirmation was a willful violation of the stay because the defaults that gave the mortgage holder the right to foreclose were immediately cured at confirmation, and the mortgage holder’s “attempt to regain its position in violation of the confirmed plan is a violation of the automatic stay.”70 The BAP distinguished earlier Ninth Circuit authority that seemed to validate the right of a mortgage holder to postpone a foreclosure sale during a bankruptcy case without violating the automatic stay.71

[30]

The BAP’s decision in Peters created a storm of problems for bankruptcy courts in the Ninth Circuit. Mortgage holders demanded “anti-Peters” language in confirmation orders—language that would permit continuance of a foreclosure sale during the Chapter 13 case pending completion of payments to the mortgage holder.72 Some courts followed the BAP decision in Peters,73 others did not.74

[31]

Peters reached the Ninth Circuit, and the Court of Appeals reversed, holding that confirmation of a Chapter 13 plan does not effect an immediate cure of mortgage defaults, and the mortgage holder did not violate the automatic stay by repeatedly postponing the foreclosure sale during the Chapter 13 case. As explained by the Ninth Circuit:

“The Ninth Circuit has held that a creditor may postpone a foreclosure sale after a debtor files a bankruptcy petition without violating the automatic stay. [First Nat’l Bank of Anchorage v. Roach (In re Roach), 660 F.2d 1316 (9th Cir. 1981).] . . . . The rationale supporting this decision is that postponement maintains the status quo and does not affect the debtor’s substantive rights. . . . [T]he theory that confirmation of a Chapter 13 plan immediately cures defaults is wrong. Section 1322(b)(5) of the Code states that a plan may “provide” for the curing of any defaults within a reasonable time” . . . . Language allowing a plan to provide for a cure of default “within a reasonable time” is not consistent with the holding that a cure occurs when the bankruptcy court confirms the plan. . . . [F]ull payment of arrearages is the cure, . . . confirmation of the plan is not. . . . The fact that the provisions of the plan bind [debtor] and [creditor] does not show that the confirmation is the cure. . . . The gist of [§ 1327(c)] is that a creditor must be satisfied with the claims and interests that the plan explicitly gives it. . . . Under section 1322, a debtor may cure a default by paying the arrearage, not by convincing a bankruptcy court to confirm its plan. Section 1327(c) merely acts as the enabling provision for section 1322. . . . Because confirmation of the reorganization plan does not effect a cure. . . [t]he debtor continues to be in default until it pays the arrearage. Thus, the Roach court’s holding is applicable in the postconfirmation context because the postponements merely continue to maintain the status quo.”75
[32]

The outcome in Peters is good news for mortgage holders in the Ninth Circuit; but the Ninth Circuit continues headed in the wrong direction in its interpretation of § 362 in Chapter 13 cases. The public announcement of the continuance of a nonjudicial foreclosure sale is the “continuation . . . of a judicial, administrative or other action or proceeding against the debtor” as those words appear in § 362(a)(1). First National Bank of Anchorage v. Roach (In re Roach),76—the case relied upon in Peters for the proposition that the continuances of a nonjudicial foreclosure sale is not a violation of the automatic stay—was a procedurally defective case in which the Ninth Circuit admitted that the merits of the stay violation issue were not preserved on appeal by the parties.77 That confirmation of a Chapter 13 plan does not instantaneously cure defaults under § 1322(b)(5) is interesting but not outcome determinative whether the mortgage holder violated the automatic stay by continuing its foreclosure sale after the petition.

[33]

A related issue that has generated more heat than light in the bankruptcy courts of the Ninth Circuit is the question whether a mortgage holder must renotice a foreclosure sale that is interrupted by the automatic stay upon the filing of a Chapter 13 petition.78 After Peters, it is certainly clear in the Ninth Circuit that § 362 is not a likely source for any renoticing requirement. Outside the Ninth Circuit, the reported bankruptcy court decisions support the view that continuation of a foreclosure sale by oral announcement does not violate the automatic stay in a Chapter 13 case.79

[34]

Although rare, the automatic stay can provide a defense for a creditor to some offenses claimed by a Chapter 13 debtor. In Maloy v. Phillips (In re Maloy),80 the debtor sued a creditor for violation of the Fair Debt Collection Practices Act. The violations claimed by the debtor included the debt collector’s failure to give the five-day notice of validation of debt required by the Act.81 The creditor successfully defended on the ground that the debtor’s Chapter 13 case was filed before the debt collector could give the five-day notice, and the automatic stay precluded compliance with the Act.

[35]

Violations of the automatic stay are more common in Chapter 13 cases than are actions to remedy violations of the automatic stay. Debtors’ counsel bring actions to remedy a violation of the stay only when the violation is sufficient to warrant the expense, and other costs of confrontation.

[36]

Before filing a motion for sanctions,82 debtors’ counsel should always contact the offending creditor by phone or letter. Often the creditor is acting without notice of the Chapter 13 case or has violated the stay in spite of all good efforts not to. The phone call will immediately stop the violation, and good judgment by counsel ends the matter. When the creditor refuses to remedy the infraction or is abusive, engaging the remedial procedures in the Code is an important responsibility of debtors’ counsel.


 

1  See, e.g., Elbar Inv., Inc. v. Pierce (In re Pierce), 272 B.R. 198, 205–12 (Bankr. S.D. Tex. 2001) (Tax sale moments after Chapter 13 filing violates the § 362 automatic stay and has no legal effect without regard to whether the parties knew that the statutory stay existed.); In re Halas, 249 B.R. 182 (Bankr. N.D. Ill. 2000) (Taking a default judgment in state court without knowledge of the Chapter 13 case is an inadvertent violation of the automatic stay that is not sanctionable under § 362(h), but the default judgment is void because it was entered in violation of the automatic stay.).

 

2  See Kerney v. Capital One Fin. Corp. (In re Sims), 278 B.R. 457, 472 (Bankr. E.D. Tenn. 2002) (The “overt act” of filing proofs of claim for improper amounts does not violate the automatic stay: “‘[T]he automatic stay serves to protect the bankruptcy estate from actions taken by creditors outside the bankruptcy court forum, not legal actions taken within the bankruptcy court.’ . . . ‘[T]he filing of a proof of claim is expressly provided for by Fed. R. Bankr. P. 3002 and is necessary for a creditor to protect its interest in a Chapter 13 case.’. . . ‘The filing of a Proof of Claim before a bankruptcy court . . . is the logical equivalent of a request for relief from the automatic stay, which cannot in itself constitute a violation of the stay pursuant to § 362(h).’”); In re Sammon, 253 B.R. 672, 680–81 (Bankr. D.S.C. 2000) (“Debtors contend that the IRS violated the automatic stay when it field an inaccurate Proof of Claim . . . . [T]he filing of a Proof of Claim is expressly provided for by Fed.R.Bankr.P. 3002 . . . . [W]here a dispute arises over the amount listed on the proof of claim, debtors are protected by Fed.R.Bankr.P. 3007 . . . . [T]he Bankruptcy Code expressly delineates the manner in which disputes over a claim are to be initiated. . . . The filing of a Proof of Claim before a bankruptcy court, which is in control over the process of administering the property of the bankruptcy estate, is the logical equivalent of a request for relief from the automatic stay, which cannot in itself constitute a violation of the stay pursuant to § 362(h).”); In re Kaskel, 269 B.R. 709 (Bankr. D. Idaho 2001) (Not a violation of the stay for the IRS to amend its proof of claim to reflect the debtors’ amendments to the schedules.).

 

3  Varela v. Ocasio (In re Ocasio), 272 B.R. 815, 820 (B.A.P. 1st Cir. 2002) (Creditor violated automatic stay by threatening to collect $425 debt: “I’m going to give you one day for you to come up with the money; otherwise I know where I can get it from. I’m going to get it from your face.”); In re Crudup, 287 B.R. 358, 363 (Bankr. E.D.N.C. 2002) (Creditor violated stay by sending letter to debtor’s wife and parents threatening to publish prebankruptcy misconduct to business community; letter was not protected by First Amendment. “Mr. Donovan’s letter was an attempt to collect the debt owed by Mr. Crudup. . . . This letter violates both purposes behind the automatic stay: it harasses and threatens the debtor, and its seeks to put Mr. Donovan ahead of other creditors in the distribution of assets. . . . [T]he limited speech curtailed by the automatic stay is not protected by the First Amendment. . . . [H]is speech and conduct go beyond informing the public of Mr. Crudup’s bankruptcy filing, and indeed go beyond the alleged ‘public service’ of trying to prevent others from becoming ‘victims’ of Mr. Crudup.”); In re Draper, 237 B.R. 502, 504 (Bankr. M.D. Fla. 1999) (Mortgage holder violated stay by sending invoices to the debtor stating an amount due and enclosing a return envelope notwithstanding that notices also stated “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.” Both debtor and counsel made numerous calls and wrote letters attempting to stop invoices. Debtor suffered no actual damages, but was awarded $1,020 attorney’s fees.); Singley v. American General Fin. (In re Singley), 233 B.R. 170, 172, 173 (Bankr. S.D. Ga.) (On motion for summary judgment, creditor may have violated stay by truthfully informing credit bureau that claim against nonfiling co-debtor was subject to a Chapter 13 filing. Creditor reported to credit bureau that a joint account was involved in a Chapter 13 bankruptcy case: “AS OF 10/01/97, THIS ACCOUNT IS INCLUDED IN OR COMPLETED THROUGH BANKRUPTCY CHAPTER 13. PREVIOUSLY WAS CURRENT AND ALL PAYMENTS WERE MADE ON TIME. MONTHS REVIEWED: 11.” Nonfiling co-debtor applied for, but was refused credit. Debtor and co-debtor sought damages for violation of automatic stay and of § 1301. “[E]ven if it is true that Movant’s report to the credit bureau contains truthful information that is a matter of public record, such a report, if made with the intent to harass or coerce a debtor and/or co-debtor into paying a pre-petition debt, could violate the automatic stays of section 362 and/or 1301.”), on reconsideration, 236 B.R. 105 (Bankr. S.D. Ga. 1999); In re Riddick, 231 B.R. 265 (Bankr. N.D. Ohio 1999) (Collection agent willfully violated automatic stay by repeatedly phoning the debtor to collect student loan after debtor informed the agent of the Chapter 13 filing. Damages assessed of $850 and $3,000 in punitive damages, $500 for each of six contacts.); In re Layton, 220 B.R. 508 (Bankr. N.D.N.Y. 1998) (County violated stay by sending demand notices and refusing to accept payment of postpetition taxes conditioned that debtor also pay prepetition taxes. Debtor entitled to attorney fees of $500 but no punitive damages.); In re Hendry, 214 B.R. 473 (Bankr. E.D. Va. 1997) (Jewelry store willfully violated automatic stay by taking debtor’s diamond ring under the pretense of trade-in and refusing to return it because the debtor owed a prepetition debt.); 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. Attorney’s fees, lost wages and benefits, rental car expenses, and punitive damages of $750 were awarded, totaling $2,970.40.); 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 attorney’s 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 Shafer, 63 B.R. 194 (Bankr. D. Kan. 1986); In re Hebert, 61 B.R. 44 (Bankr. W.D. La. 1986). But see In re Kirby, 151 B.R. 463 (Bankr. M.D. Tenn. 1992) (Creditor did not violate automatic stay or codebtor stay by pressuring debtor’s parents to purchase the debtor’s note and to put up parents’ home as collateral. Debtor’s parents are not protected by the automatic stay or by the codebtor stay, and the debtor’s parents’ house is not property of the Chapter 13 estate.).

 

4  See, e.g., In re Rijos, 263 B.R. 382, 392–93 (B.A.P. 1st Cir. 2001) (Citicorp violated the automatic stay by sending two credit card statements notwithstanding that second was “issued accidentally by the computer while a new software was being installed”; another bank willfully violated the stay by sending six demand letters after notice of the Chapter 13 petition. Citing Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265 (1st Cir. 1999), “‘[i]n cases where the creditor received actual notice of the automatic stay, courts must presume that the violation was deliberate. . . . Once the creditor receives actual notice, the burden shifts to the creditor to prevent violations of the automatic stay.’ . . . Citibank had the burden of proving that it took steps to either prevent or reverse violations of the stay. This required the introduction of admissible evidence. Citibank failed to submit admissible evidence to rebut the only inference that can be derived from the undisputed facts, namely that the stay violation was willful. . . . [T]he ‘computer did it’ defense is not viable and . . . the bankruptcy court erred in absolving Citibank from liability under § 362(h) on the grounds that the computer automatically issued a bill while a new software system was being installed. . . . The failure to afford the Debtors an opportunity to prove damages . . . violated fundamental principles of due process. . . . [T]he bankruptcy court . . . determined, as a matter of law, that [the debtors] had a duty to mitigate their damages, apparently adopting BBV’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.”). But see In re Peterson, 297 B.R. 467, 470–72 (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; debtor’s motion for sanctions was vexatious and warranted award of attorney fees. 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. . . . [D]ebtor’s counsel’s maintenance of this proceeding after Chevy Chase Bank repaid the debtor . . . was without foundation and was vexatious. . . . [C]ounsel’s efforts were designed as much to mine fees out of this situation as it [sic] was to solve the problem for the debtor.”).

 

5  Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991) (U.S. district court had no authority to continue conversion action after defendant filed Chapter 13 case. “Absent relief from the stay, judicial actions and proceedings against the debtor are void ab initio. . . . [T]he district court had no authority to continue the . . . conversion action against [the debtor] after he filed his bankruptcy petition, and therefore, the district court’s actions in violation of the stay are void ab initio. The district court must vacate its orders.”). Accord Bass v. Fillion (In re Fillion), 181 F.3d 859 (7th Cir. 1999) (State court misconstrued § 362(a) to permit entry of a default judgment against Chapter 13 debtor as a ministerial act; judgment was violation of automatic stay. Seventh Circuit distinguishes Bonilla v. Trebol Motors Corp., 150 F.3d 77 (1st Cir. 1998), and Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (1st Cir. 1997).); Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 974–78 (1st Cir. 1997) (Default judgment and judgment of foreclosure entered by state court after Chapter 13 petition were not ministerial acts, violated the automatic stay, and were not validated by retroactive annulment of the stay. “A ministerial act is one that is essentially clerical in nature. . . . [T]he state court’s actions in ordering a default and directing the entry of a judgment possess a distinctly judicial, rather than a ministerial, character. . . . [T]hose actions continued the state judicial proceeding within the meaning of section 362(a)(1). Consequently, the actions violated the automatic stay. . . . 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. . . . [Section] 362(d) permits bankruptcy courts to lift the automatic stay retroactively and thereby validate actions which otherwise would be void. . . . [A]nnulling the stay erases it retrospectively. . . . [I]f congressional intent is to be honored and the integrity of the automatic stay preserved, retroactive relief should be the long-odds exception, not the general rule. . . . [B]ecause this case involves no sufficiently unusual circumstances, the bankruptcy court abused its discretion in granting retroactive relief from the automatic stay.”); Colon v. Rivera (In re Colon), 265 B.R. 639, 643 (B.A.P. 1st Cir. 2001) (Former spouse violated automatic stay by petitioning Commonwealth court to collect support from pre- and postpetition assets and earnings; bankruptcy court inappropriately granted retroactive relief from the stay. “Rivera’s . . . actions to collect the [support] obligations from Colon’s liquidated requirement funds and his post-petition earnings necessarily involved pursuit of estate property since the Chapter 13 estate includes not only pre-petition assets, but the property and earnings acquired and earned post-petition as well. Moreover, it is undeniable that Colon’s stay violations were ‘willful’ within the meaning of § 362(h).”); Boydstun v. Reed, 218 B.R. 840 (N.D. Miss. 1998) (Complaint to replevin skidder violated stay because it was filed with knowledge of petition and debtor was in possession of the skidder.); In re Giddens, 298 B.R. 329 (Bankr. N.D. Ill. 2003) (Purchaser at tax sale violated automatic stay by applying for and causing the issuance of a tax deed.); In re Welch, 296 B.R. 170 (Bankr. C.D. Ill. 2003) (American General Finance willfully violated stay by taking a default judgment after notice of the Chapter 13 case.); In re Gorina, 296 B.R. 23 (Bankr. C.D. Cal. 2002) (Postpetition motion to determine amount of attorney fees the debtor was liable for in state court litigation violated stay and was void.); In re Wilson-Gomes, 281 B.R. 503 (Bankr. D.R.I. 2002) (Petition to foreclose right of redemption from tax sale violated stay and is void under Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (1st Cir. 1997).); In re Hoskins, 266 B.R. 872 (Bankr. W.D. Mo. 2001) (Ford violated automatic stay by removing state court collection action to federal district court; no damages are awarded, and Ford is granted retroactive relief annulling the stay.); 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 against the debtors personally; relief from the stay to bring in rem foreclosure action did not sanitize suit against debtors personally.); In re Halas, 249 B.R. 182 (Bankr. N.D. Ill. 2000) (Taking a default judgment in state court without knowledge of the bankruptcy case is an inadvertent violation of the automatic stay, but the default judgment is void.); In re Fridge, 239 B.R. 182, 190–91 (Bankr. N.D. Ill. 1999) (Attorney and law firm violated automatic stay and are sanctioned with fees of $6,484.37 and punitive damages of $2,000 for questioning the debtor under oath pursuant to “citation summons” about the source of money to pay the filing fee then “stubbornly persisted in litigating an indefensible position” that spiraled out of control. A citation summons is a proceeding to locate assets in aid of collecting a judgment and includes a provision restraining the debtor from transferring or disposing of any nonexempt property. “[D]uring pendency of a debtor’s bankruptcy, any use of state court process for collection of debts violates the automatic stay. . . . This violation of the automatic stay by Mr. Howe in seeking information under authority of the citation proceeding was not inadvertent but rather was willful. He and other Cavenaugh attorneys were aware of Debtor’s bankruptcy. Nonetheless, in accord with instructions from his firm and its practice, Mr. Howe tried to enforce the process of the citation in state court by asking at least one probing question of Debtor.); Gullett v. Continental Casualty Co. (In re Gullett), 230 B.R. 321, 332 (Bankr. S.D. Tex. 1999) (Workers’ compensation carrier violated the stay by exercising a disputed recoupment of prepetition overpayments from postpetition benefits and by asserting counterclaims in administrative and legal proceedings after actual knowledge of the Chapter 13 filing. For the carrier’s “arrogant, bad faith in continually violating the stay,” the court awards attorney’s fees totaling $30,258, sanctions of $40,000 and $8,619.54 plus interest for lost benefits.); In re Georgeff, 226 B.R. 852 (Bankr. S.D. Ohio 1998) (Creditor willfully violated stay, justifying actual damages, attorney fees, and $1,000 of punitive damages, when creditor initiated a garnishment while the Chapter 13 case was pending and creditor was uncertain whether order for conversion or dismissal had become effective.); In re Janssen, 220 B.R. 639 (Bankr. N.D. Iowa 1998) (Car lender that filed suit after Chapter 13 petition and obtained default judgment violated stay; default judgment against debtor and cosigner, the debtor’s father, is void.); 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 Taylor, 190 B.R. 459, 461 (Bankr. S.D. Fla. 1995) (Default judgment after petition was a technical violation of the stay.); In re Harrison, 185 B.R. 607 (Bankr. D. Kan. 1995) (Collection agency violated the automatic stay by bringing suit in state court after notice of the Chapter 13 filing, after it attended the meeting of creditors, and after it filed pleadings in the Chapter 13 case. The bankruptcy court, not state court, has jurisdiction to determine whether the stay was violated and to impose sanctions. The contempt determined against the creditor is civil contempt, thus the $150 fine should be paid to the debtor, not to the court. The creditor has no right to a jury trial in a proceeding for violation of the stay, and because the creditor is a corporation, it can only appear in the bankruptcy court through a licensed attorney.). But see Elliott v. Papatones (In re Papatones), 143 F.3d 623 (1st Cir. 1998) (Citing In re Soares, 107 F.3d 969 (1st Cir. 1997), docketing of judgment by state court clerk one day after Chapter 13 petition was “essentially clerical in nature” and did not violate the automatic stay. Debtor was ineligible because docketing of judgment for $276,606.87 liquidated the debt that the state court judge declared orally earlier in the day on which the petition was filed.); Groner v. Miller (In re Miller), 262 B.R. 499, 505–07 (B.A.P. 9th Cir. 2001) (Noticing the Chapter 13 debtor for a deposition with respect to the liability of other parties in state court litigation and moving the state court for sanctions when the debtor did not appear did not violate stay; “[Section] 362(a) does not preclude generation of information regarding claims by or against a non-debtor party, even where that information could eventually adversely affect the Debtor. . . . Groner issued the subpoenas to Debtor in an effort to continue her prosecution of her claims against Henry, a non-debtor. . . . [T]o the extent that Groner was eliciting Debtor’s testimony for purposes other than to continue the prosecution of her claims against Debtor, the proposed discovery did not violate the automatic stay . . . . The subpoenas were issued post-petition, and Debtor’s action in ignoring the subpoenas occurred post-petition. Because Appellants’ request for sanctions arose from Debtor’s post-petition conduct, Baker did not violate the automatic stay.”); Eisinger v. Way (In re Way), 229 B.R. 11, 13 (B.A.P. 9th Cir. 1998) (Attorneys did not violate the stay by continuing to prosecute motions to dismiss a prepetition lawsuit brought by the debtor against their clients. “The primary purposes of § 362 do not apply, however, to offensive actions by a debtor or bankruptcy trustee, as the same policy considerations do not exist where the debtor has initiated a prepetition lawsuit against a creditor. . . . Therefore, we have clearly held that the automatic stay does not prohibit a defendant in an action brought by a plaintiff/debtor from defending itself in that action.”); In re Tant, 156 B.R. 1018 (Bankr. W.D. Mo. 1993) (Entry of default judgment by state court after the filing of a petition is not a violation of the automatic stay where state court gave notice of the entry of that judgment prior to the filing of the Chapter 13 case and judgment was effective upon notice. The ministerial task of formally filing the order after the petition did not violate the automatic stay. Even if formal entry of judgment violated the automatic stay, it was “voidable,” not void, and equity favors allowing the state court judgment to stand against the debtor.).

 

6  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 Prine, 222 B.R. 610 (Bankr. N.D. Iowa 1997) (Notation of lien on title to mobile home while prior Chapter 13 case was pending was violation of stay and is void; dismissal of first case and refiling does not change this result.); In re Warren, 217 B.R. 538 (Bankr. S.D. Tex. 1997) (Recording of judgment lien seven days after Chapter 13 petition was violation of the automatic stay, was voidable, and did not create a secured claim.).

 

7  11 U.S.C. § 362(b)(9), prior to amendment by the Bankruptcy Reform Act of 1994, excepted from the automatic stay “the issuance to the debtor by a governmental unit of a notice of tax deficiency.”

 

8  See, e.g., Schwartz v. United States (In re Schwartz), 954 F.2d 569 (9th Cir. 1992) (Assessment of 100% penalty in violation of automatic stay during debtor’s prior Chapter 11 case is void in subsequent Chapter 13 case.); In re Murray, 193 B.R. 20, 21–22 (Bankr. E.D. Cal. 1996) (Declines to retroactively annul or grant relief from stay to validate IRS assessment. IRS assessed tax liabilities against a Chapter 13 debtor without obtaining relief from the stay. Debtors objected to proof of claim on ground that Service had violated the automatic stay. IRS opposed debtors’ objection by seeking retroactive annulment of stay to validate its assessment. “Acts in violation of the automatic stay are void. Schwartz v. United States (In re Schwartz), 954 F.2d 569, 571 (9th Cir. 1992). However, the court may grant retroactive relief from the automatic stay ‘for cause.’ . . . [R]etroactively lifting the automatic stay in the instant case would unjustly harm the integrity of the bankruptcy process—because the Service has nonchalantly and continuously acted in violation of the stay. . . . [T]his court observes with concern that the Service has routinely made assessments in violation of the automatic stay despite notice of a taxpayer’s bankruptcy petition. The Service should not be rewarded for its negligent, if not willful, disregard of the Bankruptcy Code. Any harm to the Service from enforcing the stay does not outweigh the harm to the bankruptcy process if the stay were lifted to ratify repeated abuses.”). See also Goldston v. United States (In re Goldston), 104 F.3d 1198 (10th Cir. 1997) (Assessment of responsible person liability in violation of automatic stay in prior Chapter 11 case does not defeat IRS’s claim for that same liability in the taxpayer’s subsequent Chapter 13 case. Invalidity of assessment may defeat lien claim of IRS, but the debtor remains the responsible person and cannot defeat the IRS claim based on the violation of the automatic stay.).

    Section 116 of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106 (1994), amended § 362(b)(9) to permit a governmental unit to audit a debtor to determine tax liability, to issue a notice of tax deficiency, to demand tax returns from a debtor, to make an assessment of any tax due from a debtor and to issue a notice or demand for payment of taxes. In Chapter 13 cases filed after October 22, 1994, the assessment of taxes and penalties discussed in Schwartz and Murray would not be a violation of the automatic stay. See, e.g., In re Bryant, 294 B.R. 791, 798–99 (Bankr. S.D. Ala. 2002) (IRS did not violate stay by sending letters because of exception in § 362(b)(9). “[U]nder 11 U.S.C. § 362(b)(9), if it is an ‘issuance of a notice and demand for payment’ of a tax assessment then it does not violate the automatic stay. . . . The IRS is still prohibited from taking steps to collect the tax. However, it is allowed ‘to make an assessment and send the first bill notifying the taxpayers of the liability.’”).

 

9  In re Martinez, 196 B.R. 225 (D.P.R. 1996) (Department of Treasury violated the automatic stay by filing a tax lien after Chapter 13 petition. Because Treasury did not file a proof of claim, the commonwealth of Puerto Rico has not waived sovereign immunity under § 106(a) as amended in 1994.); Clark v. United States (In re Clark), 207 B.R. 559, 564 (Bankr. S.D. Ohio 1997) (IRS violated stay by demanding payments and levying on postconfirmation wages to collect postpetition tax claims. “The Service may not take any action to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate, nor may the Service act to create, perfect, or enforce any lien against property of the estate, without first obtaining relief from the stay.”); Flynn v. IRS (In re Flynn), 169 B.R. 1007 (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.); In re Jones, 164 B.R. 543 (Bankr. N.D. Tex. 1994) (Postdischarge 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.); Matravers v. United States (In re Matravers), 149 B.R. 204 (Bankr. D. Utah 1993) (IRS postpetition seizure of property and other actions to collect taxes after the filing of the debtors’ Chapter 13 petition “clearly violated the automatic stay.” Finding a waiver of sovereign immunity, court ordered IRS to return seized property and to pay attorney’s fees and court costs.); In re DeLuca, 142 B.R. 687 (Bankr. D.N.J. 1992) (IRS levy on Chapter 13 trustee to collect prepetition debt from funds on hand at dismissal of Chapter 13 case violated the automatic stay and is void because at dismissal, and consistent with § 349(b)(3), the court retained jurisdiction over the preconfirmation payments to determine the allowance of claims for professional fees. Service of a notice of levy by the IRS on the Chapter 13 trustee after dismissal but before a hearing on the fee applications was an act to perfect or enforce a prepetition lien against property of the estate and was void under § 362(a)(4).); In re Gault, 136 B.R. 736, 738–39 (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. “The willfulness requirement refers to the deliberateness of the conduct and the knowledge of the bankruptcy filing, not to a specific intent to violate a court order. . . . [T]he IRS was aware of the debtor’s bankruptcy case. It filed claims in the bankruptcy case and . . . with actual knowledge that it was violating the automatic stay, [the IRS] served the three ‘Notices Of Intent To Levy’ on the debtor.”). See also In re Lovato, 203 B.R. 747, 749 (Bankr. D. Wyo. 1996) (IRS willfully violated discharge injunction by freezing tax refunds to collect dischargeable tax debts. Confirmed Chapter 13 plan provided for prepetition dischargeable tax debts by surrender of collateral. IRS failed to realize all of its claim by foreclosure on its collateral and froze debtor’s postconfirmation tax refunds to collect the rest. In the meantime, debtor completed payments under the plan, and a discharge was entered. IRS refused to release tax refunds, and debtor sought sanctions. Although the discharge did not invalidate the IRS’s liens on the debtor’s property, “the IRS does not have a lien on the postpetition tax refunds due Mr. Lovato. Nor does IRS have a right of setoff against the refunds. The IRS owes a debt to Mr. Lovato in the amount of the unpaid tax refunds, but Mr. Lovato does not owe a debt to the IRS. Mr. Lovato’s personal obligation to the IRS was discharged without objection by the IRS . . . . Clearly, the IRS has violated the discharge injunction by attempting to force Mr. Lovato to substitute the refunds for [the liens on other collateral].” IRS ordered to release tax refunds and to pay fees and costs of $937.). Compare In re Smiley, 189 B.R. 338, 341 (Bankr. E.D. Pa. 1995) (IRS did not violate stay by instructing bank to transfer debtor’s accounts after the petition because prepetition levy divested the debtor of all property interest in the accounts. “When the IRS levies upon a saleable asset, the owner of the subject property retains two significant interests in the property prior to its tax sale. . . . [T]he right to redeem . . . also . . . the right to receive any surplus. . . . [A] levy on nonsalable assets, specifically cash or cash equivalents, is a different matter. After a levy on cash or a cash equivalent, the property owner no longer retains any significant interest in the cash or the cash equivalent. . . . [T]he rights of redemption or surplus are not applicable. . . . [S]ince the tax debt exceeds the funds in the Debtor’s bank account, the Debtor has no effective right of surplus. Accordingly, the Debtor did not retain any identifiable interest in her bank account after the IRS levy on the account. It follows that the funds did not become property of the subsequently created estate. Since the funds did not become property of the estate, the postpetition demand of the IRS that Sharon Savings Bank transfer Debtor’s funds to the IRS pursuant to a prepetition notice of levy does not violate the provisions of the automatic stay under 11 U.S.C. § 362(a).”).

 

10  United States v. Eagle Inv. Co. (In re Crosby), 109 B.R. 195 (Bankr. S.D. Miss. 1989). See In re Samaniego, 224 B.R. 154, 163–65 (Bankr. E.D. Wash. 1998) (Recording of tax sale deeds two days after filing of Chapter 13 case violated stay and is void; however, tax sale two weeks before filing stripped debtors of all equitable interests in property, thus it was appropriate to annul the stay retroactive to the date of the petition to validate recording of deeds. Real property sold at a tax sale on December 12, 1997. Tax deeds were executed, but not recorded until December 26, 1997. On December 24, 1997, the debtors filed a Chapter 13 petition. Tax sales were regularly conducted under state law, and debtors could not avoid the purchasers’ interests under § 544, 548, or 549. Citing Schwartz v. United States (In re Schwartz), 954 F.2d 569 (9th Cir. 1992), “the delivery and recording of the Treasurer’s deeds were void and of no force and effect.” However, “the debtors have no viable rights remaining . . . . The debtors hold bare legal title to the lots sold at the tax sale. They retain no interest in this property of benefit to themselves or their estate. . . . [W]here the purchasers hold equitable title and the debtors retain only bare legal title, cause exists to allow the equitable owner to obtain the legal title. . . . The automatic stay will be annulled as to delivery and recording of the tax deeds.”).

 

11  See Ford Motor Credit Co. v. Florio (In re Florio), 229 B.R. 606 (S.D.N.Y. 1999) (Repossession of debtor’s vehicles a month after debtor tendered $4,500 check to cure defaults violated conditional order for relief from the stay; FMCC ordered to pay $8,699.85 as damages and attorneys’ fees. Bankruptcy court vacated stay subject to the condition that the debtor cure postpetition arrearages before August 10. On August 10, 1998, the debtor delivered a check for $4,500 to the FMCC office. FMCC credited the payment on August 12 and then cashed the debtor’s check. One month later, FMCC repossessed the debtor’s business vehicles pursuant to the conditional order. FMCC violated stay. Damages were $7,500 for lost business income, $1,199.85 for the cost of renting a replacement truck, plus reasonable attorneys’ fees.); Cox v. Billy Pounds Motors, Inc. (In re Cox), 214 B.R. 635 (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; debtor entitled to $1,000 for attorney’s fees and $5,000 for the loss of a job.); Davis v. Gatorwheel, Inc. (In re Davis), 265 B.R. 453 (Bankr. N.D. Fla. 2001) (Willful violation of the stay justifying actual damages of $169, attorney fees of $2,062.50 and punitive damages of $4,500 when car lender repossessed car one day after Chapter 13 petition then refused to release the car for almost a month using various subterfuges to avoid returning the car.); In re Meeks, 260 B.R. 46 (Bankr. M.D. Fla. 2000) (Car lender willfully violated automatic stay by contacting the debtor, demanding payment and repossessing the debtor’s car.); Skinner v. Cumberland Auto Ctr. (In re Skinner), 238 B.R. 120, 124 (Bankr. M.D. Tenn. 1999) (Dealer wilfully violated stay by repossessing car after the petition and the debtor is entitled to damages, but debtor is not entitled to turnover because “Buyer’s Order” was subject to a condition precedent of financing that was not satisfied. “The debtor’s rights under the purchase order came into the bankruptcy estate. The automatic stay protected the car from seizure by Cumberland in order to protect the debtor’s contract rights that came into the bankruptcy estate. . . . Cumberland clearly violated the automatic stay by taking the car from the debtor after he had filed Chapter 13. The debtor can recover damages.” However, because of the financing contingency, it was not clear that the debtor could use the case under § 363 thus, the court denied turnover.); Diviney v. NationsBank of Tex. (In re Diviney), 211 B.R. 951 (Bankr. N.D. Okla. 1997) (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.), aff’d, 225 B.R. 762 (B.A.P. 10th Cir. 1998); 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; because debtor’s counsel could have minimized the problem by giving immediate notice to car lender, damages are reduced.); 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.). Compare Rader v. White Chevrolet, Inc., 61 B.R. 73 (Bankr. S.D. Ohio 1986) (Creditor did not violate the automatic stay when it repossessed automobile a few days before Chapter 13 petition. Repossession was complete once the creditor took possession, and creditor did not violate stay when it transported the vehicle after the petition.).

 

12  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 damages when creditor did not seek relief from the stay but proceeded in state court to take a money judgment and a judgment for possession against the debtor.).

 

13  Smith v. First Am. Bank, N.A. (In re Smith), 876 F.2d 524 (6th Cir. 1989). Accord In re Nowell, 232 B.R. 370, 373 (Bankr. S.D. Ohio 1999) (Car lender violated stay by transferring title to repossessed car with actual knowledge of Chapter 13 petition, notwithstanding that debtor’s right to redeem was cut off before the petition. Car was repossessed on October 13. On November 2, lender contracted to sell the car to an unrelated buyer. On November 6, debtor filed Chapter 13 and gave notice to lender. On November 12, title was transferred to the lender and on November 16, title was transferred to the buyer. “Under Ohio law, an enforceable contract of sale also terminates the debtor’s right to redeem. . . . This finding that the contract of sale executed on November 2, 1998 between CAR and the third party buyer terminated the debtor’s right to redeem the car does not mean that the debtor lacked any interest in the case at the time of his bankruptcy filing. The vehicle was still titled to the debtor. Under 11 U.S.C. § 541(a)(1), therefore, that title interest, however limited it may be because of the termination of the debtor’s right to redeem, is still a legal interest which is property of the bankruptcy estate. CAR was not free to exercise any control over that legal interest without first obtaining relief from the automatic stay. . . . CAR violated the automatic stay by taking affirmative actions to complete a transfer of the title to the vehicle from the debtor to CAR, then to CAR Inc. and finally to the buyer. Further, such violation took place with actual knowledge of the bankruptcy filing. . . . [T]he debtor is entitled to recovery of actual damages, including costs and attorney’s fees.”); Bush v. NationsBank (In re Bush), 166 B.R. 69, 71–72 (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 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 a 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).”). See also National City Bank v. Elliott (In re Elliott), 214 B.R. 148 (B.A.P. 6th Cir. 1997) (Car lender not entitled to relief from stay to dispose of car surrendered before petition because petition was filed before sale and debtor’s power to modify under § 1322(b)(2) continues until sale. Under Ohio law, lender has “repossession title” and possession at petition, but statutory right of redemption was sufficient property interest to support debtor’s use of § 1322(b)(2). Applying Federal Land Bank of Louisville v. Glenn (In re Glenn), 760 F.2d 1428 (6th Cir.), cert. denied, 474 U.S. 849, 106 S. Ct. 144, 88 L. Ed. 2d 119 (1985), “sale or other disposition . . . is the cutoff point of a Chapter 13 debtor’s power to modify a secured creditor’s claim under § 1322(b)(2).”); American Honda Fin. Corp. v. Littleton (In re Littleton), 220 B.R. 710, 715 (Bankr. M.D. Ga. 1998) (Applying Georgia law, car repossessed the day before petition remained property of Chapter 13 estate, and “because Debtors’ car is property of the estate, pursuant to § 362(a)(3) of the Code the automatic stay applies to the vehicle. . . . Honda was well advised to seek relief from the automatic stay before disposing of the vehicle.”). But see Duffy v. Big Al’s Autorama, Inc. (In re Duffy), 186 B.R. 503 (Bankr. D. Colo. 1995) (Creditor does not need relief from the stay because it repossessed and sold debtor’s car four days before the Chapter 13 petition. No property interest remained in the debtor at the petition to trigger the automatic stay.).

 

14  See Long Beach Acceptance Corp. v. City of Chicago (In re Madison), 249 B.R. 751, 757–59 (Bankr. N.D. Ill. 2000) (Car lender’s adversary proceeding against City of Chicago for damages for violation of the automatic stay survives motion to dismiss. City towed Chapter 13 debtor’s car for failure to pay prepetition parking tickets. City had notice of the filing and disposed of the car after the petition and before the debtor could surrender the car to the lender through the plan. “Although the Debtor here did not have physical possession of the Vehicle when he filed in bankruptcy, he retained significant legal interests and rights in the Vehicle, and those interests became property of the estate formed under § 541(a)(1) by the bankruptcy filing. Therefore, as property of the Debtor’s bankruptcy estate, the Vehicle gained protections of the automatic stay . . . . While [the automatic stay] principally protects debtors from collection efforts, it is also intended to protect interests of secured creditors of the estate. . . . [T]he redress § 362(h) provided to parties injured by willful violations of that stay extends to both debtors and creditors. . . . While Defendant’s continued possession of the Vehicle after imposition of the automatic stay did not give rise to a claim under § 362(h), its alleged disposal of the Vehicle during a period in which the automatic stay was in effect could give rise to such a claim.”).

 

15  See § 70.1 [ Criminal Action or Proceeding Exception ] § 58.7  Criminal Action or Proceeding Exception. See, e.g., Emberton v. Lobb (In re Emberton), 263 B.R. 817, 824–25 (Bankr. W.D. Ky. 2001) (Buyer under an installment sales contract and Commonwealth’s attorney willfully violated the automatic stay by prosecuting the debtors for theft during Chapter 13 case. “The Bankruptcy Code precludes the use of criminal actions instituted for the purpose of collecting a debt. . . . [Mr. Lobb’s] actions, along with those of the Commonwealth’s Attorney in seeking a criminal indictment against the Embertons, resulting in their arrest and incarceration for 21 days, compel the Court to conclude that Defendants committed a willful violation of the stay. . . . [Section] 362(b)(4) . . . does not apply where a criminal action is pursued and initiated against the debtor for the purpose of debt collection. . . . Mr. Lobb intentionally sought the Hart County Commonwealth Attorneys’ assistance in instituting criminal proceedings against the Embertons to collect a debt and gain an advantage over other creditors in bankruptcy. . . . The acts that caused the Embertons’ damage were the request to the County Attorney for the indictment, the indictment based on inaccurate information, the Embertons’ incarceration and Mr. Lobb’s participation in the pretrial diversion negotiations, which taken as a whole, indicate an intent to secure payment of a debt.” Debtors awarded actual damages of $8,758.21 and punitive damages of $26,274.63. Commonwealth attorney was enjoined from enforcing a pretrial diversion agreement and directed to vacate the debtors’ pleas and expunge the debtors’ criminal records.); Walters v. Sherwood Mun. Court (In re Walters), 219 B.R. 520, 527–28 (Bankr. W.D. Ark. 1998) (Municipality violated automatic stay by arresting debtor and forcing payment of prepetition fine and restitution. Debtor listed Sherwood Municipal Court with a claim for restitution, and confirmed plan provided for full payment of the restitution debt. Municipality failed to file a claim and was not receiving payments under the plan. After confirmation, debtor had a car accident, and police officers discovered outstanding warrant for nonpayment of the restitution debt. Municipal clerk and court officials required the debtor to pay nearly $1,000 to be released from arrest. “[W]ith regard to an obligation to pay a fine or restitution imposed prepetition, when the Sherwood Municipal Court received notice of the bankruptcy case, the obligations imposed by section 362 of the Bankruptcy Code required it to: . . . ensure that there were no warrants outstanding . . . cancel any such warrants . . . ensure that no such warrants . . . are re-issued during the pendency of the bankruptcy case . . . upon the arrest of the debtor . . . ensure the debtor’s immediate release without condition of any monetary payment . . . . [A] court may not prohibit or otherwise preclude a debtor from paying the restitution through the plan.” That the claim for restitution was nondischargeable was irrelevant to the effect of the automatic stay. For “improperly coerced payment of the restitution debt in wilful violation of the automatic stay,” Sherwood Municipal Court ordered to refund the funds it received from the debtor with interest and attorney fees totaling $2,044.56.). See also Boydstun v. Reed, 218 B.R. 840 (N.D. Miss. 1998) (Civil complaint to replevin a skidder violated the automatic stay and is not excused by the creditor’s separate initiation of a criminal action against the debtor for embezzling the same skidder.). But see Kimsey v. Suskie (In re Kimsey), 263 B.R. 244 (Bankr. E.D. Ark. 2001) (Distinguishing Walters v. Sherwood Municipal Court (In re Walters), 219 B.R. 520 (Bankr. E.D. Ark. 1998), City of North Little Rock did not violate automatic stay or § 525 by failing to reinstate debtor’s driver’s license, which was revoked prepetition for failure to pay traffic fines.); Womack v. Mays (In re Mays), 253 B.R. 241, 242–44 (Bankr. E.D. Ark. 2000) (Pro se Chapter 13 debtor’s inartful complaint for violation of the automatic stay fails to state a cause of action against state court and state prosecutors that continued to seek collection of child support. “It is well settled that a court and prosecutors enjoy judicial immunity from suit for acts taken in the course of their official judicial and prosecutorial duties. . . . [U]nder the guise of arguing the applicability of the automatic stay in bankruptcy, the debtor seeks the relief afforded by a writ of habeas corpus. . . . [T]he debtor’s incarceration occurred prior to the filing of the petition in bankruptcy. Since the debtor was not a debtor under title 11, there was no automatic stay in place precluding a prepetition finding of contempt, imposition of a fine, or incarceration. No stay being in effect at the time of incarceration, there can be no willful violations of the stay. . . . The Court also notes that it has no jurisdiction to entertain a Petition for Writ of Habeas Corpus. . . . The statute which permitted the bankruptcy court to issue a writ of habeas corpus, 28 U.S.C. § 2256, never took effect. Accordingly, it would appear that this Court does not have the power to order the release of the debtor.”).

 

16  Coates v. Peachtree Apts. (In re Coates), 108 B.R. 823 (Bankr. M.D. Ga. 1989).

 

17  In re Briskey, 258 B.R. 473, 477–78 (Bankr. M.D. Ala. 2001) (Debtor’s motion for release of garnishment is denied because no motion is necessary to put the garnishing creditor at risk of sanctions for violating the stay. “It is clear beyond all doubt that garnishing creditors are required to take all necessary action to release their garnishments in order to implement the automatic stay, upon receiving notice of a bankruptcy filing. This is true even if the garnishment process became effective prior to the date of the bankruptcy filing and did not, at the time it first became effective, violate the automatic stay. Indeed, the creditor must not only cease from taking any affirmative action which would violate the automatic stay, it must also take all necessary affirmative action to stop proceedings which are in violation of the automatic stay. . . . When a garnishment proceeding is pending at the time a bankruptcy petition is filed, the debtor or his counsel should make a reasonable attempt to communicate with the creditor by giving notice of the bankruptcy filing and requesting that action be taken to release the garnishment. . . . In the event that a creditor does not take the necessary action within a reasonable period of time, the debtor may move the Bankruptcy Court for an appropriate order seeking damages, attorney’s fees and, if appropriate, punitive damages. . . . [I]t is simply not necessary to obtain an individual bankruptcy court order to release each garnishment for each debtor. Creditors, or their lawyers, commit willful violations of the automatic stay when they fail to promptly release a garnishment and may be sanctioned as the equities of each individual case may dictate.”); In re Halas, 249 B.R. 182, 192 (Bankr. N.D. Ill. 2000) (Creditor violated automatic stay by failing to join in debtor’s request that default judgment be vacated and garnishment based on judgment ended. “[A] certified copy of the bankruptcy case docket was produced indicating that the default judgment had been entered before Halas’ bankruptcy was dismissed. At that point, Platek should have stopped defending against the motion to vacate judgment and should himself have joined in the Halas request to vacate judgment. . . . By further resistence, Platek caused that hearing to become more expensive . . . . [A]fter the judgment was vacated, Platek did not take steps to avoid the garnishment against Halas’ salary and thereby reverse effects of the default judgment and the garnishment which was as void a proceeding as the judgment itself, nor were the garnished funds returned. . . . Because the violation by Platek became willful, Halas is also entitled to recover his damages which includes reasonable attorney’s fees.”); 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. Punitive damages were refused.); Sucre v. MIC Leasing Corp. (In re Sucre), 226 B.R. 340, 347–48 (Bankr. S.D.N.Y. 1998) (Creditor violated stay by failing to stop garnishment upon notice of Chapter 13 filing and by failing to return money from its garnishment for four months after filing. Debtor entitled to damages, including prejudgment interest and attorney fees. “[B]y failing to discontinue its garnishment action against Ms. Sucre upon receiving actual notice of the filing of her chapter 13 petition MIC Leasing willfully violated § 362(a) of the Bankruptcy Code. . . . [A] creditor has an affirmative duty under § 362 to take the necessary steps to discontinue its collection activities against the debtor. . . . MIC Leasing also violated § 362(a) by failing to promptly return to Ms. Sucre the amounts garnished from her postpetition wages after receiving actual notice of her bankruptcy case. . . . [A] creditor has an affirmative duty to return the debtor to the status quo position as of the time of the filing of the petition.”); 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 Price, 179 B.R. 209 (Bankr. E.D. Cal. 1995) (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.); O’Neal v. Beneficial of Tenn. (In re O’Neal), 165 B.R. 859, 862–63 (Bankr. M.D. Tenn. 1994) (Creditor violated automatic stay by receiving and failing to stop automatic loan payment deduction from the debtors’ bank account after filing of Chapter 13 case. “Beneficial’s post-petition receipt of an automatic loan payment from the debtors’ checking account, while Beneficial was aware of the debtors’ bankruptcy filing, constituted an ‘act to collect . . . a claim against a debtor,’ thereby violating the stay under § 362(a)(6). . . . [T]he debtors’ mere failure to instruct Dominion Bank to stop the automatic loan payments was not an expression or indication of their willingness to voluntarily pay the pre-petition debt. . . . [Section] 362(a)(3) would stay Beneficial from dispossessing the debtors of their checking account deposits. . . . Consequently, . . . Beneficial has violated the automatic stay imposed by the debtors’ Chapter 13 filing under § 362(a)(3), as well. . . . Creditors should have the burden and responsibility of ensuring that no post-petition automatic loan payments are withdrawn from a debtor’s checking account, absent the debtor’s clear, post-petition consent to do so.” Creditor was ordered to return $116 automatic loan payment and pay attorney’s fees and costs. Punitive damages were refused.); Gaertner v. Choske (In re Henry), 143 B.R. 811 (Bankr. W.D. Pa. 1992) (Postpetition continuation of prepetition wage attachment to collect child support arrearage was violation of automatic stay. Defendant must return all monies received since the petition.); 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 is required to reimburse the debtor for attorneys’ fees and costs.).

 

18  Hudson v. United States Postal Serv. (In re Hudson), 216 B.R. 244 (Bankr. W.D. Tenn. 1997) (Postal service assessment of $50 administrative fee for income deduction order violated automatic stay. Confirmed plan preserved the estate. Postal service required to return the administrative fee and prohibited from assessing similar fees in Chapter 13 cases in the district absent relief from stay.), aff’d, 230 B.R. 542, 545 (W.D. Tenn. 1999) (“[T]he fifty dollar fees deducted from Hudson’s wages represent ‘earnings from services performed by the debtor,’ and were therefore property of the bankruptcy estate. Hence, exercising control over those earnings violated the automatic stay.”).

 

19  Ledford v. Fidelity Fin. Servs. (In re Hill), 174 B.R. 949 (Bankr. S.D. Ohio 1994). Compare Dougherty v. IRS (In re Dougherty), 187 B.R. 883, 885 (Bankr. E.D. Pa. 1995) (Debtor improperly used § 362(a) to remedy the refusal of the IRS to turn over a tax refund. “[T]he Debtors’ invocation of 11 U.S.C. § 362(a) [is] misplaced. . . . ‘[W]e do not believe that it is a violation of the automatic stay for a party indebted to a debtor to refuse to make payments.’ A debtor can more properly simply file an adversary proceeding to recover the sums due without invoking § 362.”).

 

20  In re Reiter, 126 B.R. 961 (Bankr. W.D. Tex. 1991). Compare Goldsby v. United States (In re Goldsby), 135 B.R. 611 (Bankr. E.D. Ark. 1992) (IRS did not violate automatic stay by issuing tax assessment against nondebtor spouse. Nondebtor spouse’s income was not property of the Chapter 13 estate.).

 

21  In re Sumrall, 56 B.R. 134 (Bankr. M.D. Fla. 1985). See also 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.). But see Franklin v. Kwik Cash of Martin (In re Franklin), 254 B.R. 718 (Bankr. W.D. Tenn. 2000) (Deferred presentment service provider did not violate the automatic stay when it presented the debtors’ prepetition check after the Chapter 13 filing because of the exception to the stay in § 362(b)(11); however, debtors can recover the funds because payment of the check was an unauthorized postpetition transfer avoidable under § 549.).

 

22  Loyola Univ. v. McClarty, 234 B.R. 386, 387 (E.D. La. 1999) (University violated the automatic stay and was appropriately sanctioned for refusing to give the debtor her academic transcript. University refused to give the debtor her academic transcript based on a “policy not to release the transcript until any debt to the school is paid in full.” Bankruptcy court found willful violation of the automatic stay and imposed monetary sanctions. “[T]he bankruptcy court followed the view of the majority of courts which have resolved this issue and concluded that Loyola’s withholding of the transcript was a violation of the automatic stay. The court reasoned that Loyola’s actions amounted to a debt enforcement and collection mechanism which the automatic stay seeks to prevent. . . . This Court also notes that from the plain language of 11 U.S.C. § 362(b), . . . education loans are not included and, therefore, not excepted from the automatic stay. . . . The university acted deliberately with the knowledge of the pending bankruptcy and, therefore, was in willful violation of the stay.”). Accord Virginia Union Univ. v. Parham, 56 B.R. 531 (Bankr. E.D. Va. 1986). Contra In re Billingsley, 276 B.R. 48, 52–53 (Bankr. D.N.J. 2002) (Private university did not violate automatic stay by refusing to release academic transcript when debtor was in default on student loan. Citing Johnson v. Edinboro State College, 728 F.2d 163 (3d Cir. 1984): “[r]ecognizing the weight of authority to the contrary, this court finds that, in light of the Supreme Court’s ruling in Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 116 S. Ct. 286, 133 L. Ed. 2d 258 (1995), and under basic contract principles, a university does not violate the automatic stay by withholding a transcript from a debtor who has defaulted on a concededly nondischargeable student loan. . . . Temple University maintained an official policy of withholding the academic transcripts of students that have defaulted on their educational loans. . . . Temple University’s withholding of the debtor’s transcript is merely a refusal to perform on a promise to create and deliver a record of the debtor’s academic performance. Such conduct is wholly consistent with the very purpose of the automatic stay: ‘to maintain the status quo that exists at the time of the debtor’s bankruptcy filing.’ . . . [I]f the debtor had not filed for relief under chapter 13, she would have no right to compel Temple University to perform on its promise to create and distribute her academic transcript. The debtor should not enjoy greater rights under her contract inside of bankruptcy than she would enjoy outside of bankruptcy. . . . [C]onsistent with Strumpf, this court holds that Temple University’s refusal to perform on its promise is not a violation of the automatic stay.”). See also Colon v. Professional Recoveries Inc. (In re Colon), 212 B.R. 23, 25 (Bankr. D.P.R. 1997) (Great Lakes Higher Education Corporation did not violate stay by refusing to remove a default notation on the debtor’s records. Default notation was made before petition. Plan proposed to pay 100% but could not pay postpetition interest thus student loans remained in default. “The denial of student aid to a bankruptcy student based on a pre-petition debt, does not violate the automatic stay. . . . Great Lakes did not make any post-petition attempt to collect the pre-petition debt. There was no demand or attempt to coerce payment. The Court concludes that Great Lakes’ refusal to remove the default notation was a communication that the debtor had an uncured default.”).

 

23  462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983).

 

24  See § 46.2 [ Prepetition Repossession, Levy, Sale or Conveyance ] § 46.4  Prepetition Repossession, Levy, Sale or Conveyance.

 

25  See § 52.1 [ Turnover of Property ] § 50.1  Turnover of Property.

 

26  Carr v. Security Sav. & Loan Ass’n, 130 B.R. 434 (D.N.J. 1991) (Secured claim holder violated automatic stay by refusing to turn over car it repossessed after relief from the stay in prior Chapter 13 case. Debtor defaulted in payments on car note in prior Chapter 13 case. Creditor received relief from the stay to repossess car. Chapter 13 case was dismissed for nonpayment. Creditor then located and repossessed the debtor’s car. Debtor immediately filed second Chapter 13 case, within 180 days of the dismissal of the first case. Debtor made demand for turnover of car. Creditor refused, claiming that debtor was not eligible for Chapter 13 relief. Bankruptcy court found that there had been a “bonafide change of circumstances” which permitted the second filing notwithstanding § 109(g)(1). Bankruptcy court held that the failure of the bank to return the car to the debtor immediately upon receiving notice of the second bankruptcy petition was a willful violation of the automatic stay and awarded debtor car rental and attorney’s fees. On appeal, district court determined that “a secured creditor who is in possession of repossessed collateral in which a debtor in bankruptcy has an interest is required to turn the collateral over to the debtor’s trustee upon the filing of the bankruptcy petition . . . Section 362(a) expressly states that the filing of a bankruptcy petition activates the stay. Congress, if it wished, could have created an exception to the imposition of the automatic stay where successive petitions are filed, but it did not . . . Although a secured creditor might be placed at a disadvantage by being obligated to turn over repossessed collateral upon the filing of a possibly improper bankruptcy petition, the potential harm to the creditor is partially mitigated by the requirement of adequate protection . . . and by the possibility of recovering the costs of repossession.”); In re Shunnarah, 268 B.R. 657, 662–63 (Bankr. M.D. Fla. 2001) (Refusal to return cars repossessed before the petition violated automatic stay. “The Court respectfully disagrees with the district court decisions in [Bell-Tel Fed. Credit Union v. Kalter (In re Kalter), 257 B.R. 93 (M.D. Fla. 2000)] and [Tidewater Finance Co. v. Chiodo, No. 6:00-CV0396-3A06-JGG , 2001 WL 1822417 (M.D. Fla. May 30, 2001), aff’d sub nom. Bell-Tel Federal Credit Union v. Kalter (In re Kalter), 292 F.3d 1350 (11th Cir. 2002)] . . . . The Court agrees with the Chiodo bankruptcy court’s holding that a debtor retains an ownership interest sufficient to constitute property of the estate in a repossessed vehicle until the repossessing creditor obtains a new certificate of title . . . . Creditor’s refusal to return the vehicles after the filing of the petition is a willful violation of the automatic stay. . . . Debtors are entitled to damages for attorney’s fees in the amount of $875.00.”); Baker v. Health Servs. Credit Union (In re Baker), 264 B.R. 759, 763–64 (Bankr. M.D. Fla. 2001) (Refusal to return repossessed car is an ongoing violation of the automatic stay. “The Court respectfully disagrees with the district court in [Bell-Tel Federal Credit Union v. Kalter (In re Kalter), 257 B.R. 93 (M.D. Fla. 2000)]. Under this Court’s interpretation of Florida law, a debtor’s ownership interest in a repossessed vehicle survives until a new certificate of title is issued pursuant to § 319.28. See In re Ratliff, 260 B.R. 526, 530 (Bankr. M.D. Fla. 2000) (adopting the reasoning of the bankruptcy court in [In re Chiodo, 250 B.R. 407 (Bankr. M.D. Fla. 2000), rev’d, Case No. 6:00-CV-396-3A06-JGG, 2001 WL 1822417 (M.D. Fla. May 30, 2001), aff’d sub nom. Bell-Tel Federal Credit Union v. Kalter (In re Kalter), 292 F.3d 1350 (11th Cir. 2002)]). If a new certificate of title to a repossessed vehicle is not issued by the petition date, then the surviving ownership interest is property of a debtor’s bankruptcy estate. . . . [T]he vehicle is at least partially property of Plaintiff’s bankruptcy estate under § 541 and Defendant must turn over the vehicle in order to cure its ongoing violation of the automatic stay.”); In re Johnson, 262 B.R. 831, 848 (Bankr. D. Idaho 2001) (Creditors willfully violated the automatic stay by failing to promptly cause the return of property seized by the sheriff prepetition to enforce a judgment lien. “The Lemhi County Sheriff levied upon Debtors’ property under instruction from Creditors. Creditors therefore had the responsibility to ensure the property was promptly returned upon receiving notice of the bankruptcy petition. Creditors did not fulfill their responsibility . . . . Debtors were put to the expense and delay of bringing a motion for turnover . . . . [T]he unnecessary delay in the return of the property was a willful violation of the automatic stay, for which Debtors should recover their actual damages, including attorney fees and costs.”); Patterson v. Chrysler Fin. Co. (In re Patterson), No. 99-35259DWS, 00-0258, 2000 WL 1692838, at *6 (Bankr. E.D. Pa. Nov. 2, 2000) (unpublished) (Applying United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983), “§ 542(a) grants to the estate a possessory interest in property of the debtor that was seized by a creditor prior to the filing of the debtor’s bankruptcy petition”; that right of possession will support an action for sanctions for violation of the automatic stay unless the exception for a transferee in good faith without knowledge applies under § 542(c). Evidentiary hearing is necessary to determine whether § 542(c) applies.), after trial, 263 B.R. 82 (Bankr. E.D. Pa. 2001) (Chrysler willfully violated the automatic stay by refusing return of the debtor’s car and selling the debtor’s car with actual knowledge of the Chapter 13 petition. Chrysler also violated Pennsylvania Unfair Trade Practices and Consumer Protection law by refusing to reinstate and return the debtor’s car after she had done all that its notice of repossession required.); In re Jackson, 251 B.R. 597, 601 (Bankr. D. Utah 2000) (Creditor that repossessed the debtor’s car before the petition violated the automatic stay by conditioning turnover on proof of insurance and adequate protection. “The Bankruptcy Amendments and Federal Judgeship Act of 1984 . . . extended the scope of the automatic stay to specifically include any exercise of control over property of the estate. . . . [T]he Eighth Circuit in Knaus v. Concordia Lumber Company, Inc., 889 F.2d 773 (8th Cir. 1989) states at 775 that: ‘The duty to turn over the property is not contingent upon any predicate violation of the stay, any order of the bankruptcy court, or any demand by the creditor. [Citations omitted.] Rather, the duty arises upon the filing of the bankruptcy petition. The failure to fulfill this duty, regardless of whether the original seizure was lawful, constitutes a prohibited attempt to “exercise control over the property of the estate” in violation of the automatic stay.’ . . . ‘Withholding possession of property of a bankruptcy estate is the essence of “exercising control” over possession.’ [TranSouth Financial Corp. v. Sharon (In re Sharon),] 234 B.R. 676, 682 (6th Cir. BAP 1999). . . . [W]ithholding possession of estate property that was seized prepetition is an exercise of control over property of the estate that is expressly prohibited by § 362(a)(3) and is a violation [of] the automatic stay.”); Greene v. Associates (In re Greene), 248 B.R. 583 (Bankr. N.D. Ala. 2000) (Distinguishing and declining to follow Charles R. Hall Motors, Inc. v. Lewis (In re Lewis), 137 F.3d 1280 (11th Cir.), reh’g denied en banc, 149 F.3d 1197 (11th Cir. 1998), Alabama Chapter 13 debtor retains a property interest that is protected by the stay in a car repossessed but not disposed of before the petition.); In re Bunton, 246 B.R. 851, 853 (Bankr. N.D. Ohio 2000) (Citing TranSouth Financial Corp. v. Sharon (In re Sharon), 234 B.R. 676 (B.A.P. 6th Cir. 1999), car lender violated automatic stay by refusing to turn over a car that was scheduled but not redeemed, reaffirmed or surrendered in prior Chapter 7 case and that was repossessed a few days before the debtor filed a Chapter 13 petition. The car became property of the Chapter 13 estate, and “[a] creditor who fails to return the estate’s property after it knows of the debtor’s bankruptcy is subject to sanction for willful violation of the automatic stay.”); Brown v. Town & Country Sales & Servs., Inc. (In re Brown), 237 B.R. 316, 318, 319–20 (Bankr. E.D. Va. 1999) (Car lender violated automatic stay by refusing to turn over truck repossessed before the petition unless the debtor paid its claim in full when debtor proposed full payment through the plan and proved insurance. Car lender sent debtor a letter stating “[w]e would like to notify you that we do not accept chapter 13 bankruptcy.” Lender repossessed truck one day before filing. “A majority of courts have held that a debtor is entitled to the return of a vehicle post-petition simply upon filing a bankruptcy case. The trend and growing minority, however, has held that a creditor does not have an affirmative duty to return property seized pre-petition, but instead that the debtor must first provide the creditor with adequate protection. . . . Because the creditor’s actions in this case would create a violation of the automatic stay under either approach, the court need not elect between the two at this time. Under the modern trend approach . . . Town & Country did not have an initial duty to return the vehicle to the debtors but rather was entitled to maintain the status quo until provided adequate protection for its property interest. . . . [T]he debtors, having provided in their plan for full payment of the creditor’s security and shown proof of insurance, were entitled to turnover of their truck. . . . Town & Country’s demand for full payment, coupled with its inaction and retention of the vehicle amount to an ‘exercise [of] control’ sufficient to find a violation of the automatic stay for failure to turnover the vehicle pursuant to 11 U.S.C. § 542(a). . . . Following the majority approach, the debtors were entitled to recover the truck upon filing bankruptcy. . . . Town & Country’s conduct amounts to a violation of the automatic stay under either approach.” Attorney’s fees and punitive damages were imposed.); 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. Newcourt repossessed semi-tractor on May 6, 1998. Debtor filed Chapter 13 on May 14, 1998, provided Newcourt with notice, provided evidence of insurance and demanded turnover. Newcourt refused and filed motion for adequate protection on May 20. “Newcourt, upon notice of the filing of this case, secured the repossessed property in a locked location and refused to return it without proof of income ability and an offer of adequate protection payments, which only Newcourt would decide were or were not sufficient. The refusal to turnover the vehicle upon request of the debtor was an exercise in control of the vehicle in violation of § 362(a).”); American Honda Fin. Corp. v. Littleton (In re Littleton), 220 B.R. 710, 715 (Bankr. M.D. Ga. 1998) (Applying Georgia law, car repossessed the day before petition remained property of Chapter 13 estate and “because Debtors’ car is property of the estate, pursuant to § 362(a)(3) of the Code the automatic stay applies to the vehicle. . . . Honda was well advised to seek relief from the automatic stay before disposing of the vehicle.” No discussion whether Honda violated stay by refusing debtors’ postpetition demand for turnover; Honda filed its motion for relief from stay one week after petition and demand for turnover.); In re Sharon, 200 B.R. 181, 187–91 (Bankr. S.D. Ohio 1996) (Creditor that repossessed car before the petition violated stay by refusing to return the car where plan proposed to pay for the car, the debtor had insurance, and counsel made repeated requests that the car be returned. “A creditor who has lawfully seized a vehicle prepetition, but refuses to turn over the vehicle upon a chapter 13 debtor’s postpetition demand, violates the automatic stay. . . . [Section] 362(a)(3) prohibits a creditor from taking ‘any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.’ . . . [T]he phrase ‘exercise control’ encompasses acts of a creditor in denying a chapter 13 debtor possession and use of a debtor’s vehicle when the return of the property has been requested. . . . Unless the stay does not apply pursuant to § 362(b), or has terminated pursuant to § 362(c), the provisions of the Code require the creditor, not the debtor, to take affirmative action pursuant to § 362(d) to obtain relief from stay or adequate protection by filing a request in the bankruptcy court. . . . Pursuant to § 363(e), an entity with an interest in the property used by the trustee or the debtor may request the court to prohibit or condition such use as is necessary to provide adequate protection of such interest. But in the absence of such a request, the debtor is free to use property of the estate (except cash collateral) without obtaining a court order and, certainly, without obtaining a creditor’s permission. . . . [Section] 542(a) . . . contains no provision requiring adequate protection as a prerequisite to turnover. . . .  [United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983),] decision obviously preceded the 1984 Amendments and therefore could not, and does not, contain an analysis of the ‘exercise control’ language added to § 362(a)(3). . . . The majority of courts have interpreted § 362(a)(3) to mean that any postpetition retention of a debtor’s property violates the automatic stay and is sanctionable.” Debtor awarded attorneys’ fees in the amount of $2,122.50. Court declined to award punitive damages.), aff’d, 234 B.R. 676 (B.A.P. 6th Cir. 1999) (Transouth violated § 362(b)(3) by withholding possession of Chapter 13 debtor’s car after demand and tender of adequate protection. United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983), draws possession of car into Chapter 13 estate notwithstanding prepetition repossession. Transouth is obligated by § 542 to turn over the car to the debtor upon demand and tender of adequate protection. Bankruptcy Code does not grant Transouth the right to refuse turnover of possession based on Transouth’s subjective dissatisfaction with tender of adequate protection. Debtor has standing to seek sanctions under § 362(h).); Kirk v. Shamut Bank (In re Kirk), 199 B.R. 70, 72–73 (Bankr. N.D. Ga. 1996) (Sanctions imposed for creditor’s refusal to return a car repossessed one day before Chapter 13 petition. “When a creditor has actual knowledge that a debtor has filed a bankruptcy petition, the creditor has an affirmative duty to terminate or undo any action which violates the automatic stay. Section 542 of the Bankruptcy Code requires an entity in possession of property of the estate to turn over such property to the debtor-in-possession. . . . [A]s soon as Respondent was notified of Debtors’ bankruptcy petition, Respondent had a duty pursuant to 11 U.S.C. § 542 to return the Vehicle to Debtors. . . . After contact by Debtors’ attorney, however, Respondent failed to return the vehicle . . . . Debtors were, therefore, required to file an adversary complaint . . . . [A]n order was obtained without opposition . . . . Respondent failed to file an answer . . . failed to appear at the hearing on Debtors’ complaint for turnover . . . failed to respond to or appear at the hearing on Debtors’ motion for sanctions. . . . [C]ompensatory damages in the amount of $500, which represents the attorneys fees.”). See also National City Bank v. Elliott (In re Elliott), 214 B.R. 148 (B.A.P. 6th Cir. 1997) (Car lender not entitled to relief from stay to dispose of car surrendered before petition because petition was filed before sale, and debtor’s power to modify under § 1322(b)(2) continues until sale. Under Ohio law, lender has “repossession title” and possession at petition, but statutory right of redemption was sufficient property interest to support debtor’s use of § 1322(b)(2). Applying Federal Land Bank of Louisville v. Glenn (In re Glenn), 760 F.2d 1428 (6th Cir.), cert. denied, 474 U.S. 849, 106 S. Ct. 144, 88 L. Ed. 2d 119 (1985), “sale or other disposition . . . is the cutoff point of a Chapter 13 debtor’s power to modify a secured creditor’s claim under § 1322(b)(2).”).

 

27  Charles R. Hall Motors, Inc. v. Lewis (In re Lewis), 211 B.R. 970, 974–75 (N.D. Ala. 1997) (Car lender did not violate automatic stay because car repossessed before the petition did not become property of the Chapter 13 estate under Alabama law. “In the present case, the appellees were in default on their payments for the car at the time that they filed their second bankruptcy proceeding. Furthermore, the appellant was in possession of the car by virtue of its having repossessed the car. In these circumstances under Alabama law, the appellant had both legal title to and right of possession of the car. . . . [A]ppellees’ sole interest which became property of the estate under section 541 was the right to redeem the collateral, not to possess the collateral. . . . The right to redeem the property was not sufficient to propel the automobile into the property of the estate. . . . This statutory right of redemption . . . requires full payment of all obligations to the debtor [sic] plus all reasonable expenses . . . . [A]ssuming that the appellees did have a right to cure their default, until they did so, the automobile was owned and possessed by appellant, subject only to the right of redemption. . . . [A]ppellant was not required to return the property under § 542, nor was the automobile subject to the automatic stay provision of § 362. . . . Additionally, even if the appellees had been entitled to an award of compensatory damages, the award of punitive damages by the bankruptcy court was not warranted. Assuming, arguendo, that the property in question was part of appellees’ estate and subject to the turnover and automatic stay provisions of sections 542(a) and 362 respectively, the award of punitive damages was not justified. Any deliberate, willful act that violates the automatic stay justifies awarding actual damages. . . . ‘Additional findings of maliciousness or bad faith on the part of the offender warrants further imposition of punitive damages.’ . . . While appellant’s act of repossessing the automobile was willful, it was not malicious. Appellant repossessed the vehicle after the dismissal of the first Chapter 13 filing, but before the second Chapter 13 filing. Appellant stored the car on its lot until the hearing before the bankruptcy court . . . . [A] willful violation alone is insufficient to justify punitive damages.”), aff’d, 137 F.3d 1280, 1284 (11th Cir. 1998) (Statutory right of redemption became property of the Chapter 13 estate, but not the automobile itself. Because neither debtor nor trustee took the “affirmative steps” prescribed by Alabama law to redeem repossessed collateral—“‘tender[ ] fulfillment of all [secured] obligations’ plus expenses”—automobile is not subject to turnover, and creditor could not violate the automatic stay by refusing to return car.); Boggan v. Hoff Ford, Inc. (In re Boggan), 251 B.R. 95 (B.A.P. 9th Cir. 2000) (Distinguishing Expeditors International of Washington, Inc. v. Colortran, Inc. (In re Colortran, Inc.), 210 B.R. 823 (B.A.P. 9th Cir. 1997), aff’d in part and vacated in part on other grounds, 165 F.3d 35 (9th Cir. 1998), repairman with a possessory lien did not violate the automatic stay by refusing to return car to Chapter 13 debtor because, under §§ 362(b)(3) and 546(b), no stay arose to prevent retention of the car.); Lamar v. Mitsubishi Motors Credit of Am., Inc. (In re Lamar), 249 B.R. 822 (Bankr. S.D. Ga. 2000) (Car lessor did not violate the automatic stay by selling the car after the petition because lessor terminated all of the debtors’ rights in the car by repossession before the petition and mailing a notice of termination.); Barringer v. EAB Leasing (In re Barringer), 244 B.R. 402, 407–10 (Bankr. E.D. Mich. 1999) (Rejecting TranSouth Financial Corp. v. Sharon (In re Sharon), 234 B.R. 676 (B.A.P. 6th Cir. 1999), creditor that repossessed truck before the petition does not violate the automatic stay by refusing turnover pending the filing of an adversary proceeding and an order for turnover. “[I]n this Court’s view, the majority in Sharon erred in asserting that under ‘[United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983)], possession of the Debtor’s car was part of the bundle of rights that became “property of the estate” at the Chapter 13 petition.’ . . . When a creditor’s prepetition seizure is lawful . . . the right of possession does not automatically become part of the estate by virtue of § 541(a)(1). . . . Rather, this right remains non-estate property until it is acquired by the trustee from the creditor. . . . [W]e cannot accept the proposition that Congress intended that the trustee’s right of possession under § 542(a) be absolute or self-effectuating. . . . We instead conclude that the right must be judicially recognized in the form of a court order compelling turnover. Upon entry of such an order, the right of possession is in effect transferred from the creditor to the trustee. At this point, the right becomes property of the estate pursuant to § 541(a)(7).”); Nash v. Ford Motor Credit Co. (In re Nash), 228 B.R. 669, 673–74 (Bankr. N.D. Ill. 1999) (Lender that repossessed but had not sold car before the petition, did not violate stay by refusing turnover; creditor can retain car until trial of its adequate protection rights. “[O]ther opinions have found that a creditor may retain possession of collateral repossessed pre-petition until adequate protection is provided or offered. . . . The latter viewpoint is better reasoned; the creditor’s property rights merit protection when it turns over possession of an automobile to the debtor. Thus, a creditor that repossesses estate property pre-petition is under no obligation to return the property post- petition until and unless adequate protection is provided. . . . ‘Since the purpose of the automatic stay is to maintain the status quo that existed on the date of a debtor’s bankruptcy filing, the creditor should not have to turn over the vehicle absent assurance that its pre-petition position will be protected.’”); Spears v. Ford Motor Credit Co. (In re Spears), 223 B.R. 159, 165 (Bankr. N.D. Ill. 1998) (Acknowledging conflicting authority, Ford did not violate stay by refusing to turn over car it repossessed but had not sold before the Chapter 13 petition notwithstanding that debtor tendered adequate protection in the form of full coverage insurance and confirmed plan that provided for full payment of Ford’s secured claim. FMCC repossessed car during second week of January 1998. Debtor filed Chapter 13 on January 26, 1998. On January 28, counsel notified FMCC of the filing and requested return of the car. FMCC refused and filed a motion to modify stay on February 17, 1998. That motion was denied on March 19, 1998. Because bankruptcy court ruled that an adversary proceeding was required, debtor filed an adversary proceeding for turnover and for sanctions on May 5, 1998. The adversary proceeding was tried on June 11, 1998. In the meantime, on April 7, 1998, the court confirmed a plan that included full payment of FMCC’s secured claim. The debtor had maintained full-coverage insurance. “FMCC justifiably had doubts as to plaintiff’s ability to provide adequate protection, as she had previously failed to fund another Chapter 13 plan that contained substantially the same terms as the plan that has been confirmed in this case. FMCC brought a motion to modify the stay within several weeks of the petition, and there was no apparent obstacle to the bringing of an adversary proceeding for turnover had plaintiff chosen to do so. . . . FMCC did not violate the automatic stay in refusing to voluntarily surrender plaintiff’s vehicle.”); Eaton v. River City Body Shop (In re Eaton), 220 B.R. 629 (Bankr. E.D. Ark. 1998) (Car repair shop did not violate automatic stay by retaining possession after demand because, under Arkansas law, perfection of repairman’s lien was accomplished by possession, and under § 546(b), debtor’s right of recovery was subject to repairman’s right to continue perfection of its lien by possession.); In re Fitch, 217 B.R. 286, 289–91 (Bankr. S.D. Cal. 1998) (Car lender did not violate stay by refusing to return car repossessed before petition because under contract and California law, no right of possession became property of the Chapter 13 estate. Autoflow repossessed car on April 2; debtor filed Chapter 13 petition on April 15 and demanded return. Autoflow refused absent proof of insurance. Debtor filed a motion for sanctions, and Autoflow filed a motion for relief from the stay. Debtor provided proof of insurance, and Autoflow returned the car. Debtor proceeded with motion for sanctions. Distinguishing Expeditors Int’l of Wash., Inc. v. Colortran (In re Colortran), 210 B.R. 823 (B.A.P. 9th Cir. 1997), and In re Del Mission Ltd., 98 F.3d 1147 (9th Cir. 1996), “[P]rior to the commencement of the case the Debtor had lost her right to possession of the car. . . . Debtor retained title to the car, but the right to possess the car remained with Autoflow and did not become property of the estate. . . . Since the right to possess the car was not among the property interests which became property of the estate, Autoflow’s acts to exercise control over the right to possess the car did not violate the stay. Autoflow did not violate the automatic stay by retaining the car pending adequate protection. . . . A creditor who has properly taken possession prepetition should not have to turn over such property absent assurance that its prepetition position will be protected. Demanding proof of insurance is a valid request for such assurance.”); In re Young, 193 B.R. 620, 623–29 (Bankr. D.D.C. 1996) (Creditor not in contempt for violation of stay for retaining car repossessed before Chapter 13 petition; 1984 amendments to § 362(a)(3) do not require a prepetition repossessor to return collateral before the debtor provides adequate protection. Toyota Motor Credit repossessed one month before the petition but did not sell car. After the petition, debtor demanded possession, but Toyota refused. “[T]he 1984 language [in § 362(a)(3)] forbidding an act to exercise control over property has been interpreted by some courts to mean that any postpetition retention of the debtor’s property violates the automatic stay and is, indeed, sanctionable. See In re Knaus, 889 F.2d 773 (8th Cir. 1989) . . . . [O]ther courts have rejected the Knaus approach, reasoning that § 362(a)(3) freezes the status quo on the filing of the petition rather than mandates affirmative action by the creditor in possession of property seized prepetition to return it immediately. . . . This court rejects the Knaus court’s . . . interpretation of the amendment to § 362(a)(3) . . . . [T]he prohibition against an act to exercise control does not reach the passive act of continuing to possess property. . . . Under § 363(e) the creditor can obtain an order prohibiting a proposed use of the property unless the estate provides adequate protection. This constitutes a significant defense to the grant of a turnover order under § 542(a). The defense would be abrogated by an interpretation of § 362(a)(3) requiring turnover without permitting invocation of the defense. . . . [P]rior to the § 362(a)(3) amendment, the common practice of conditioning turnover orders on proof of adequate protection continued. . . . [T]he potential harm to the secured creditor of requiring immediate turnover far outweighs any harm to the debtor or the estate. . . .  [T]he effect of interpreting § 362(a)(3) as requiring immediate turnover would be to destroy some security interests. . . . [T]he exercise control language in § 362(a)(3) requires only that the secured creditor maintain the status quo . . . . Congress did not intend to expand the automatic stay to mandate affirmative acts on the part of the creditors. Nor did Congress intend with this amendment to abrogate the creditor’s right to assert an entitlement to adequate protection prior to turnover. Rather, . . . the stay is intended only to prohibit postpetition affirmative acts by creditors and thus acts as a freeze of the status quo at petition.”); Rader v. White Chevrolet, Inc., 61 B.R. 73 (Bankr. S.D. Ohio 1986) (Creditor did not violate the automatic stay when it repossessed automobile a few days before Chapter 13 petition. Repossession was complete once the creditor took possession, and creditor did not violate stay when it transported the vehicle after the petition.). See also In re Walker, 204 B.R. 812, 816 (Bankr. M.D. Fla. 1997) (National Title Loan, Inc. did not violate stay when it repossessed and sold truck to a related entity in between two Chapter 13 cases because debtor was in default of a Motor Vehicle Title Pledge Contract and only property interest that came into bankruptcy estate was right to redeem by payment in full. Debtor pledged tractor trailer for a cash loan of $2,028.25. Contract had a 30-day maturity date and required 22% “redemption premium” per month. “Debtor signed his Contract of Title Pledge with National Title Loan, Inc. on February 27, 1996. Thus, but for the Debtor’s first bankruptcy filing on March 14, 1996, the redemption period would have expired on April 27, 1997. . . . [P]ursuant to § 108(b), debtor’s right to redeem the title to the truck expired on May 14, 1996. . . . Debtor failed to redeem the truck prior to the expiration of the redemption period, and the Court finds that his interest in the property was terminated by law on May 14, 1996. National Title Loan, Inc. repossessed the truck on August 16, 1996. The repossession occurred after the expiration of the redemption period, but prior to the debtor’s current bankruptcy filing. Thus, on the date of the repossession, the truck was not property of a bankruptcy estate and was not protected by the automatic stay.”).

 

28  See § 46.2 [ Prepetition Repossession, Levy, Sale or Conveyance ] § 46.4  Prepetition Repossession, Levy, Sale or Conveyance. See, e.g., Charles R. Hall Motors, Inc. v. Lewis (In re Lewis), 137 F.3d 1280 (11th Cir. 1998); In re Fitch, 217 B.R. 286 (Bankr. S.D. Cal. 1998).

 

29  See § 48.1 [ Adequate Protection of Lienholders prior to Confirmation ] § 47.1  Adequate Protection of Lienholders before Confirmation. See.,e.g., Spears v. Ford Motor Credit Co. (In re Spears), 223 B.R. 159 (Bankr. N.D. Ill. 1998).

 

30  See § 52.1 [ Turnover of Property ] § 50.1  Turnover of Property. See, e.g., Eaton v. River City Body Shop (In re Eaton), 220 B.R. 629 (Bankr. E.D. Ark. 1998); In re Young, 193 B.R. 620 (Bankr. D.D.C. 1996).

 

31  See below in this section. See, e.g., Boggan v. Hoff Ford, Inc. (In re Boggan), 251 B.R. 95, 99–101 & n.5 (B.A.P. 9th Cir. 2000) (“The Ninth Circuit has held that the knowing retention of estate property is a violation of the automatic stay. See State of Cal. Employment Dev. Dep’t v. Taxel (In re Del Mission Ltd.), 98 F.3d 1147, 1151 (9th Cir. 1996). However, under § 362(b)(3), the filing of a petition does not stay ‘any act to perfect, or maintain or continue the perfection of, an interest in property to the extent the trustee’s rights and powers are subject to such perfection under section 546(b) of this title.’ . . . The relevant portion of § 546(b) in turn provides that ‘[t]he rights and powers of a trustee under sections 544, 545, and 549 of this title are subject to any generally applicable law that— . . . (B) provides for the maintenance or continuation of perfection of an interest in property to be effective against an entity that acquires rights in such property before the date on which action is taken to effect such maintenance or continuation.’ . . . Idaho Code § 45-806 (1999). . . . provides that the mechanic’s lien is superior and prior to any security interest in the car obtained after the commencement of the repairs as long as the mechanic maintains perfection by not voluntarily surrendering possession of the car. . . . [B]ecause IC § 45-806 satisfies the requirements of § 546(b)(1)(B), no stay arose to bar Hoff’s retention of the car to maintain perfection of its lien. . . . We disagree with Debtor’s contention that our decision in [Expeditors International of Washington, Inc. v. Colortran, Inc. (In re Colortran, Inc.), 210 B.R. 823 (B.A.P. 9th Cir. 1997), aff’d in part and vacated in part on other grounds, 165 F.3d 35 (9th Cir. 1998),] dictates a different result. In Colortran, . . . we held that . . . ‘A creditor who requires possession in order to achieve or maintain perfection has the right to file a motion for relief from the automatic stay and request adequate protection such that its lien rights are preserved. However, the creditor must tender the goods or face sanctions for violation of the stay. The creditor has a right to and may request terms of adequate protection while simultaneously returning the goods. However, while the creditor may suggest terms of adequate protection, it may not unilaterally condition the return of the property on its own determination of adequate protection. . . . If the creditor is convinced that its interest will be irreparably harmed if the property it turned over before the motion for relief from the stay can be heard, it may request an emergency hearing under § 362(f).’ However because § 362(b)(3) was not implicated in Colortran and we therefore did not address the impact of § 362(b)(3) and § 546(b)(1)(B) on the analysis, Colortran does not control our decision here.” In a footnote, “although a secured creditor does not violate the automatic stay by retaining possession of estate property in order to maintain or continue perfection of its lien under § 546(b)(1)(B), it must still comply with § 542(a), although it is entitled to seek adequate protection of its interest in order to preserve its lien rights.”).

 

32  As discussed in § 52.1 [ Turnover of Property ] § 50.1  Turnover of Property, delivery to the Chapter 13 trustee satisfies the turnover requirement in § 542, but there is no clear statutory authority for the trustee to possess estate property before confirmation, see 11 U.S.C. § 1306(b), discussed in §§ 44.1 [ Debtor Has Exclusive Control of Estate Property ] § 45.1  Debtor Has Exclusive Possession and Control of Estate Property and 60.1 [ Avoidance and Recovery Powers ] § 53.12  Avoidance and Recovery Powers, and few trustees are prepared to accept collateral from creditors.

 

33  11 U.S.C. § 362(f) provides:

Upon request of a party in interest, the court, with or without a hearing, shall grant such relief from the stay provided under subsection (a) of this section as is necessary to prevent irreparable damage to the interest of an entity in property, if such interest will suffer such damage before there is an opportunity for notice and a hearing under subsection (d) or (e) of this section.

 

34  See Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265, 268 (1st Cir. 1999) (Affirming Bankruptcy Appellate Panel, creditor and creditor’s counsel violated the automatic stay and are sanctioned with $25,000 damages for emotional distress and $18,220.68 for attorneys’ fees. Creditor was denied relief from the stay. Creditor then forwarded the debtor’s file from Massachusetts to Florida law firm to initiate foreclosure proceeding against property owned by the debtor in Florida. The file contained discharge order. The creditor published foreclosure notice in Florida in a way that made the debtor’s neighbors aware of the proceeding. Debtor’s lawyer told Florida counsel about Chapter 13 case and six weeks later, Florida counsel dismissed the foreclosure suit. Creditor failed to raise argument that stay expired when discharge was entered. “[E]motional damages qualify as ‘actual damages’ under § 362(h).” The debtor’s evidence of “the sharp decline in social invitations and outings following Fleet’s violation of the automatic stay” was sufficient to justify an award for emotional distress. “An honest accounting of actual damages under § 362(h) must include the psychological suffering of this eighty-five year old retired widower.”); Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 974–78 (1st Cir. 1997) (Default judgment and judgment of foreclosure entered by state court after Chapter 13 petition were not “ministerial” acts, violated the automatic stay, and were not validated by retroactive annulment of the stay. “A ministerial act is one that is essentially clerical in nature. . . . [T]he state court’s actions in ordering a default and directing the entry of a judgment possess a distinctly judicial, rather than a ministerial, character. . . . [T]hose actions continued the state judicial proceeding within the meaning of section 362(a)(1). Consequently, the actions violated the automatic stay. . . . 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. . . . [Section] 362(d) permits bankruptcy courts to lift the automatic stay retroactively and thereby validate actions which otherwise would be void. . . . [A]nnulling the stay erases it retrospectively. . . . [I]f congressional intent is to be honored and the integrity of the automatic stay preserved, retroactive relief should be the long-odds exception, not the general rule. . . . [B]ecause this case involves no sufficiently unusual circumstances, the bankruptcy court abused its discretion in granting retroactive relief from the automatic stay.”); 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; sale was void, and BAP sustained debtor’s objection to mortgage holder’s proof of claim that included fees and expenses for foreclosure sale. That the debtor did not respond to postpetition notices and letters with respect to foreclosure did not constitute an equitable exception to the rule that acts in violation of the automatic stay are void because the debtor gave notice in the “commonly accepted manner,” the debtor thought that her Chapter 13 filing gave good reason to disregard the mortgage holder’s notices, the debtor disclosed her debt to the mortgage holder, and the debtor made no other obvious effort to hide or appear “stealthily silent.”); Great Pac. Money Mkts., Inc. v. Krueger (In re Krueger), 88 B.R. 238 (B.A.P. 9th Cir. 1988) (Foreclosure sale after improperly noticed dismissal of case was in violation of the automatic stay and void.); In re Bates, 270 B.R. 455 (Bankr. N.D. Ill. 2001) (Application for tax deed after tax sale violated stay and could be declared void; purchaser’s appearance in state court during Chapter 13 case seeking tax deed violated stay, but annulment was appropriate because the period for redemption under Illinois law expired before the filing.); Davenport v. S.I. Sec. (In re Davenport), 268 B.R. 159 (Bankr. N.D. Ill. 2001) (Purchaser at prepetition Illinois tax sale violated stay by seeking tax deed from state court after the petition.); In re Donovan, 266 B.R. 862 (Bankr. S.D. Iowa 2001) (Purchaser at prepetition tax sale violated automatic stay by seeking tax deed after Chapter 13 petition.); Bunch v. Hopkins Sav. Bank (In re Bunch), 249 B.R. 667 (Bankr. D. Md. 2000) (Mortgage holder may have violated stay by foreclosing with knowledge that the debtor was the personal representative and sole beneficiary of his deceased mother’s estate and the debtor was in possession of the real property owned by his mother at her death.); In re Smith, 245 B.R. 622 (Bankr. W.D. Mo. 2000) (Foreclosure sale one day after Chapter 13 petition violated the automatic stay and is void.); Smith v. London (In re Smith), 224 B.R. 44, 46–47 (Bankr. E.D. Mich. 1998) (Foreclosure sale in violation of stay is void notwithstanding that mortgage holder did not have notice of filing; § 549(c) does not protect purchaser because sale itself is void. Mellon scheduled foreclosure sale for June 11, 1997. Debtor filed first Chapter 13 petition on June 10, 1997. Debtor’s attorney notified Mellon’s attorney that day, and foreclosure sale was adjourned. First case was dismissed on September 4, 1997. Mellon scheduled new foreclosure of October 1, 1997. Debtor filed second Chapter 13 petition on September 18, 1997, but did not notify Mellon’s counsel. On October 1, not aware of the second filing, Mellon conducted foreclosure sale and sold property to a third-party purchaser. “That Mellon Mortgage was not given notice of Smith’s bankruptcy filing is irrelevant in determining whether the stay was violated. . . .  [T]he Sixth Circuit has held, ‘[A]ctions taken in violation of the automatic stay are invalid and voidable and shall be voided absent limited equitable circumstances.’ Easley v. Pettibone Michigan Corp., 990 F.2d 905, 911 (6th Cir. 1993). . . . After Smith filed her first bankruptcy petition, Mellon Mortgage adjourned the foreclosure sale and did not notify Smith that it had rescheduled the sale after her first petition was dismissed. Smith asserts that because she was not aware that the foreclosure sale had been rescheduled, she did not personally notify Mellon Mortgage that she filed her second petition, as she did when she filed her first petition. The Court finds that under the circumstances, there is no indication that Smith intentionally or unreasonably withheld notice of her petition. . . . Accordingly, pursuant to Easley, the Court finds that the foreclosure sale is void.”); In re Ferrante, 195 B.R. 990, 993 (Bankr. N.D.N.Y. 1996) (Although bank had relief from stay to foreclose its lien on real property, bank violated stay by recording deficiency judgment that created a postpetition lien on other property of the estate. “Nowhere in the Bank’s motion papers is there any request that the Court also allow it to create and perfect a separate lien on other property of the estate postpetition based on a deficiency judgment. By docketing its deficiency judgment, the Bank violated the automatic stay as to that other property. Actions taken in violation of the automatic stay are generally void.”); In re Nail, 195 B.R. 922, 929–30 (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. Chapter 13 case was dismissed on September 14, 1995. Motion to reinstate was filed on September 19, 1995. Oral order granting motion to reinstate was stated at a hearing on October 25, 1995. Foreclosure sale occurred on November 21, 1995. Written order granting the motion to reinstate was entered on December 20, 1995. “[T]he court finds that its oral order granting the debtors’ motion to reinstate their case was effective when made. This Court also finds that section 362 of the Bankruptcy Code imposed an automatic stay on the actions of the movant at the same moment the oral order was issued. Consequently, the movant’s foreclosure on the debtors’ home was in violation of the oral order and the automatic stay. Those actions are void and the foreclosure is due to be set aside.”); Walker v. California Mortgage Servs. (In re Walker), 67 B.R. 811 (Bankr. C.D. Cal. 1986) (Chapter 13 debtor can set aside foreclosure sale conducted in violation of automatic stay where purchaser at foreclosure sale failed to record trustee’s deed until after debtor had recorded a notice of the filing of Chapter 13.). But see Jones v. Garcia (In re Jones), 63 F.3d 411 (5th Cir. 1995) (Mortgage foreclosure sale three weeks after filing of Chapter 13 case did not violate automatic stay because mortgage holder received no notice, notice was not recorded in the county property records, and bankruptcy court annulled the automatic stay retroactively under § 362(d).); Glaser v. Dowell (In re Glaser), 56 F.3d 71 (9th Cir. 1995) (Notwithstanding knowledge of the bankruptcy filing, a creditor’s postpetition foreclosure sale can be validated by the bankruptcy court’s retroactive annulment of the stay under § 362(d).); St. Clair v. Beneficial Mortgage Co. (In re St. Clair), 251 B.R. 660 (D.N.J. 2000) (Purchaser of the debtors’ homestead at a foreclosure sale that obtained a writ of possession before the petition did not violate the automatic stay by continuing its efforts to dispossess the debtors after the petition because the debtors had no colorable claim to possession or control of the property.); 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.); In re Hall, 216 B.R. 702 (Bankr. E.D.N.Y. 1998) (Foreclosure sale a week after filing of Chapter 13 case may have been void or voidable, but four bankruptcy petitions in less than two years, each filed to frustrate foreclosure, justified retroactive annulment of stay to validate foreclosure sale.); In re Christian, 199 B.R. 382, 389 (Bankr. N.D. Ill. 1996) (After reinstatement of dismissed Chapter 13 case, Citibank violated stay by seeking confirmation of its foreclosure sale in state court. However, because foreclosure sale was completed before reinstatement of the Chapter 13 case, the debtor could not cure defaults with respect to the underlying mortgage and equity favored annulment of the stay to validate Citibank’s actions. “Citibank should not have proceeded to confirmation of the sale without obtaining relief from the automatic stay imposed by Section 362 of the Code. Prior to the confirmation hearing, Christian had at least a possessory interest in his home, and that interest became property of the estate pursuant to Section 541(a) of the Code. Confirmation of the judicial sale was thus, at the very least, ‘the enforcement against the debtor or against property of the estate, of a judgment obtained before the commencement of the [bankruptcy] case,’ an act prohibited by Section 362(a)(2). However, because Christian could not cure the default in his mortgage or modify Citibank’s rights through his Chapter 13 plan, Citibank would have had cause for relief from the automatic stay, pursuant to Section 362(d) of the Code. . . . Annulment of the stay is therefore appropriate.”), rev’d, 214 B.R. 352, 356 (N.D. Ill. 1997) (“Because I have held that Section 1322(c)(1) permits a debtor to cure a mortgage default until the foreclosure sale is confirmed, the [bankruptcy] court’s decision to annul must be reversed. I am remanding the case . . . for a new determination whether the balance of equities favors granting the annulment of the stay or the imposition of sanctions for violating it.”), after remand, 231 B.R. 288 (N.D. Ill. 1999) (Bankruptcy court again retroactively annulled the automatic stay; on further appeal, district court affirms retroactive annulment based on findings that the debtor failed to take any action after reinstatement of the Chapter 13 plan and that Citibank detrimentally relied on that inaction to complete the foreclosure sale, make improvements to the property and resell the property to a third party.); Masterson v. Berkeley Fed. Bank & Trust (In re Masterson), 189 B.R. 250 (Bankr. D.R.I. 1995) (Mortgage company did not violate stay when it foreclosed after relief from the stay in a Chapter 7 case; that debtor retained new counsel and converted to Chapter 13 did not resurrect the stay.); Noone v. Cyr (In re Noone), 188 B.R. 710 (Bankr. D. Mass. 1995) (Assignee of security interest in real property did not violate stay by conducting foreclosure sale after assignor was granted relief from the stay. Assignee was subrogated to the rights of the mortgagee.); In re Walker, 171 B.R. 197 (Bankr. E.D. Pa. 1994) (Mortgage holder did not violate automatic stay when it foreclosed because property was titled in debtor’s mother, and debtor’s “testamentary” and leasehold interests in the property were too speculative, vague, and contrived to be protected by the stay.).

 

35  Littke v. Trust Corp. Mortgage Co. (In re Littke), 105 B.R. 905 (Bankr. N.D. Ind. 1989).

 

36  Sapp v. Wilson (In re Sapp), 91 B.R. 520 (Bankr. E.D. Mo. 1988). See 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; sale was void, and BAP sustained debtor’s objection to mortgage holder’s proof of claim that included fees and expenses for foreclosure sale. That the debtor did not respond to postpetition notices and letters with respect to foreclosure did not constitute an equitable exception to the rule that acts in violation of the automatic stay are void because the debtor gave notice in the “commonly accepted manner,” the debtor thought that her Chapter 13 filing gave good reason to disregard the mortgage holder’s notices, the debtor disclosed her debt to the mortgage holder, and the debtor made no other obvious effort to hide or appear “stealthily silent.”); In re Stork, 212 B.R. 970 (Bankr. N.D. Cal. 1997) (Recording of foreclosure sale deed 16 days after Chapter 13 petition violated the automatic stay, but appropriate to annul the stay to validate the recording because purchaser is protected by § 549(c).); Mock v. Hannett, Inc. (In re Mock), 197 B.R. 468 (Bankr. E.D. Pa. 1996) (Although Chapter 13 case is dismissed as a bad-faith filing, attorneys’ fees and expenses for stay violation are imposed on purchaser of property who knowingly recorded a deed after filing of petition.); 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.); 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 where the redemption period under Illinois law expired after the Chapter 13 petition. However, because the bankruptcy estate retained only bare legal title, the tax sale purchaser’s failure to seek stay relief “was not sufficiently egregious to warrant the imposition of damages.”); 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.). But see Jackson v. Midwest Partnership (In re Jackson), 176 B.R. 156, 158–59 (N.D. Ill. 1994) (Holder of a “certificate of purchase” from an Illinois delinquent tax sale did not violate stay when it converted that certificate into a tax deed in state court after the redemption period expired during a Chapter 13 case. Midwest obtained a certificate of purchase at a tax sale three years before the petition. Under Illinois law, the debtor had until January 24, 1992, to redeem the certificate by paying Midwest the back taxes, interest, penalties, and costs. The debtor filed Chapter 13 on January 24, 1992, extending the redemption period for 60 days. Midwest petitioned a state court for a tax deed after the filing. The bankruptcy court found that Midwest violated the automatic stay because petitioning for a tax deed perfected or enforced a lien against the debtor’s property. The district court found instead that a certificate of purchase is not a lien, rather “[i]t represents the purchase of an in rem judgment, which, under state law, grants a contingent right to title to the real estate itself. Under Illinois law, the certificate of purchase represents an absolute right to receive title of the property if redemption is not made within the statutory period. . . . A holder of a certificate has more rights than a mere lienholder. . . . Midwest’s interest is not that of a creditor. . . . [A] certificate of purchase represents an executory interest in the real estate. . . . As such, the certificate may be converted to a tax deed in the face of the automatic stay under section 362(b) of the bankruptcy code as a perfection of an interest in property because the debtor’s rights . . . to the property were subject to that perfection under sections 362(b) and 546(b) of the bankruptcy code. . . . When the redemption expires, the estate has no remaining interest in the real restate, and there is nothing for the automatic stay to enjoin.”).

 

37  See In re Dandridge, 221 B.R. 741, 745–47 (Bankr. W.D. Tenn. 1998) (Exercise of “call” provision in mortgage note during prior Chapter 13 case was invalid, and dismissal did not validate that violation of stay; in subsequent Chapter 13 case, debtor can use § 1322(b)(5) to cure defaults and maintain payments with respect to the note. Note payable in monthly installments until maturity in 2021 contained a “call” provision permitting holder to require immediate payment at five years and quarterly thereafter. During prior Chapter 13 case, fifth anniversary came, and note holder attempted to exercise call option by writing a letter to the debtor. In prior case, bankruptcy court ruled that note holder was bound by confirmed plan that cured arrearage and maintained ongoing payments. Prior case was dismissed. Debtor refiled, and note holder argued that attempted call in first case was effective in second case. “PFC was prevented from exercising its call option during the prior case because of the automatic stay. . . . It was not the mere giving of a notice, but the exercise of a substantive right that would have affected the debtor-creditor relationship and altered the obligations of the Debtor under the Note. . . . The prior attempt by PFC to exercise its call option violated the automatic stay. The Sixth Circuit has said that actions taken in violation of the automatic stay are best described as ‘invalid,’ meaning something without legal force or effect, but capable of being ratified. . . . According to the Sixth Circuit, actions taken in violation of the automatic stay are voidable and will be voided ‘absent limited equitable circumstances.’ . . . PFC is prevented by the automatic stay from exercising its call provision in this case unless the Court determines that grounds exists [sic] for terminating the automatic stay.”).

 

38  See discussion of home mortgages beginning at § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

39  See § 124.3  Does Confirmation Dissolve the Stay?, § 124.4  Postconfirmation Default and Relief from the Stay and § 124.5  Postpetition Claims and Relief from the Stay.

 

40  316 F.3d 1 (1st Cir. 2003).

 

41  316 F.3d at 3–4. Accord Smith v. Fairbanks Capital Corp. (In re Smith), 299 B.R. 687, 692–93 (Bankr. S.D. Ga. 2003) (Citing Mann v. Chase Manhattan Mortgage Corp., 316 F.3d 1 (1st Cir. 2003), Fairbanks did not violate stay by assessing and collecting attorney fees from payments directly by the debtor. “A creditors notation of accruing attorney fees does not by itself violate the automatic stay. . . . [U]ntil Fairbanks demands from Debtor more than it is entitled to under its allowed proof of claim, it cannot be said to have taken any overt act to collect those fees. . . . Fairbanks’ internal record keeping does not serve to expand the existing lien or create a new one absent some effort to obtain more than was owed at the time of filing.”); Kerney v. Capital One Fin. Corp. (In re Sims), 278 B.R. 457, 471 (Bankr. E.D. Tenn. 2002) (It is not a violation of the stay for a creditor to accrue postpetition interest and charges on its books. “[O]ther than possibly in a setoff context, mere internal bookkeeping entries by a creditor, in and of themselves, do not generally produce any effect on a debtor, much less a change or an attempted change in possession of property of the estate. Capital One or any creditor could produce all kinds of paperwork which if communicated to the debtor or a third party would violate the stay, but absent that communication, some overt act, or resulting effect on the debtor, no violation has occurred.”).

 

42  See § 358.1 [ On Liens ] § 162.3  On Liens.

 

43  See §§ 259.1 [ To Cure Postconfirmation Default ] § 127.2  To Cure Postconfirmation Default, 351.1 [ Long-Term Debts ] § 158.7  Long-Term Debts, 357.1 [ In General, Including Discharge Hearing and Discharge Injunction ] § 162.1  In General, Including Discharge Hearing and Discharge Injunction and 358.1 [ On Liens ] § 162.3  On Liens.

 

44  In re Christensen, 106 B.R. 689 (Bankr. D. Colo. 1989).

 

45  216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666 (2001).

 

46  See, e.g., 11 U.S.C. § 362(a)(5), (a)(6). See also § 243.1 [ Does Confirmation Dissolve the Stay? ] § 124.3  Does Confirmation Dissolve the Stay? for discussion of the stay and property revesting in the debtor at confirmation.

 

47  See §§ 59.1 [ Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise ] § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise and 147.1 [ Direct Payment of Mortgage or Payment by Trustee ] § 85.6  Direct Payment of Mortgage or Payment by Trustee for discussion of payments by the Chapter 13 trustee; see §§ 207.1 [ Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) ] § 113.11  Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) and 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate for the revesting of property in the debtor at confirmation.

 

48  In re Martinez, 281 B.R. 883, 887 (Bankr. W.D. Tex. 2002) (In a district where postpetition mortgage payments are made directly by the debtor to the lender and in which property of the estate does not revest in the debtor at confirmation, mortgage holder ordinarily needs relief from the stay to contact the debtor about postconfirmation default in direct payments; however, because the debtor is not damaged by notice of a postconfirmation default, in the future creditors can give an informal notice of default without violating the automatic stay. “[A] debtor suffers no actual damages from merely being notified of a missed mortgage payment—and cannot ‘manufacture’ such damages in the form of attorneys’ fees for filing a sanctions motion that, but for those fees, has no independent basis for recovery. . . . [T]hough sending an innocent notice of a missed mortgage payment post-confirmation could constitute a ‘wilful’ violation of the automatic stay within the meaning of the statute, it is a ‘no harm’ violation that cannot, as a matter of law, justify a debtor’s filing a motion for sanctions, because it generates no ‘actual damages’ within the meaning of the statute. As a matter of law, if mortgage lenders send informal notices of the sort recommended in this decision in chapter 13 cases, no sanctions will issue as a result of that notice.”).

 

49  Chase Manhattan Mortgage Corp. v. Padgett, 268 B.R. 309 (S.D. Fla. 2001).

 

50  See above in this section, and see § 78.1 [ Remedies for Violation of Stay ] § 62.5  Remedies for Violation of Stay.

 

51  See § 53.1 [ Strong-Arm Powers, Statutory Liens, Preferences and Fraudulent Conveyances ] § 50.3  Strong-Arm Powers, Statutory Liens, Preferences and Fraudulent Conveyances.

 

52  11 U.S.C. § 549(c).

 

53  Glendenning v. Third Fed. Sav. Bank (In re Glendenning), 243 B.R. 629, 634 (Bankr. E.D. Pa. 2000) (Citing In re Smith, 224 B.R. 44 (Bankr. E.D. Mich. 1998), postpetition judicial sale of a Chapter 13 debtor’s home conducted in violation of the automatic stay is not protected by § 549(c). “[Section] 549(c) is not an exception to § 362(a).” On alternative grounds, because sheriff, mortgage holder and purchaser were informed of the filing before the sale, the purchaser could not claim the protection of § 549(c). Purchaser’s bid of $87,300 for a home conservatively valued at $120,000 and probably worth closer to $166,000 was not “fair present equivalent value” and thus § 549(c) could not validate the sale.); Smith v. London (In re Smith), 224 B.R. 44, 46–47 (Bankr. E.D. Mich. 1998) (Foreclosure sale in violation of stay is void notwithstanding that mortgage holder did not have notice of filing; § 549(c) does not protect purchaser because sale itself is void. Mellon scheduled foreclosure sale for June 11, 1997. Debtor filed first Chapter 13 petition on June 10, 1997. Debtor’s attorney notified Mellon’s attorney that day, and foreclosure sale was adjourned. First case was dismissed on September 4, 1997. Mellon scheduled new foreclosure for October 1, 1997. Debtor filed second Chapter 13 petition on September 18, 1997, but did not notify Mellon’s counsel. On October 1, not aware of the second filing, Mellon conducted foreclosure sale and sold property to a third-party purchaser. “That Mellon Mortgage was not given notice of Smith’s bankruptcy filing is irrelevant in determining whether the say was violated. . . .  [T]he Sixth Circuit has held, ‘[A]ctions taken in violation of the automatic stay are invalid and voidable and shall be voided absent limited equitable circumstances.’ Easley v. Pettibone Michigan Corp., 990 F.2d 905, 911 (6th Cir. 1993). . . . After Smith filed her first bankruptcy petition, Mellon Mortgage adjourned the foreclosure sale and did not notify Smith that it had rescheduled the sale after her first petition was dismissed. Smith asserts that because she was not aware that the foreclosure sale had been rescheduled, she did not personally notify Mellon Mortgage that she filed her second petition, as she did when she filed her first petition. The Court finds that under the circumstances, there is no indication that Smith intentionally or unreasonably withheld notice of her petition. . . . Accordingly, pursuant to Easley, the Court finds that the foreclosure sale is void. . . .  [Section] 549(c) is inapplicable in this context. Section 549(c) provides an exception to the trustee’s right to avoid a transfer of property under § 549(a). . . . [T]his case does not involve an avoidance action under § 549(a). . . . [B]ecause the Court has determined that the foreclosure sale is void, the sale did not result in a transfer for purposes of § 549(c).”).

 

54  See, e.g., In re Shah, No. 99-34723DWS, 2001 WL 423024, at *3–*11 (Bankr. E.D. Pa. Apr. 10, 2001) (unpublished) (Purchaser at tax sale conducted in violation of stay is entitled to § 549(c) defense. Both mortgage holder and county taxing authority were aware of Chapter 13 case. County conducted tax sale in violation of the automatic stay. Purchaser (Fonthill) bought the property without knowledge of the Chapter 13 case and recorded a tax deed before any notice was recorded. Mortgage holder moved to void the tax sale. “[T]he Tax Sale was conducted in violation of the automatic stay. . . . [T]he law of this Circuit is clear that such act is void ab initio. . . . However, it does not follow from that proposition that the transaction at issue here, i.e., the Respondents’ purchase of the Property at the judicial tax sale is likewise void . . . . In [Bowest Corp. v. Ward (In re Ward),] 837 F.2d 124 (3d Cir. 1988), . . . the Third Circuit specifically recognized in the context of a transaction found to violate the stay, that § 549(c) provides an exception to the avoidance power granted under § 549(a). . . . Ward makes clear that § 549(c) is applicable to insulate a foreclosure sale to a good faith purchaser conducted in violation of the stay. . . . [W]hile § 549(a) is available to avoid this transaction, the statute expressly limits the use of this power to trustees . . . . Since Mellon is a creditor of the estate, it does not fit within the statutory mandate . . . . Even if Mellon was authorized to bring an avoidance action under § 549(a), or was not required to because the Tax Sale was void under § 362(a), Respondents have the defense set forth in § 549(c) to resist that consequence. . . . Fonthill had no knowledge of the Debtors’ bankruptcy case until . . . after the Tax Sale and after it recorded its deed to the Property. . . . Respondents can satisfy the ‘fair equivalent value’ requirement of § 549(c) by proving that Fonthill purchased the Property at a noncollusive properly conducted judicial tax sale. . . . [N]o copy or notice of Debtors’ bankruptcy petition was filed in the Recorder of Deeds Office in Bucks County before the deed to the Property was recorded there by Fonthill . . . . Respondents . . . are entitled to the protection provided thereunder for good faith purchasers.”); In re Fulmer-Vaught, 218 B.R. 56 (Bankr. W.D. Mo. 1998).

 

55  Carpio v. Smith (In re Carpio), 213 B.R. 744 (Bankr. W.D. Mo. 1997) (Although purchaser at foreclosure sale on day of Chapter 13 filing who recorded trustee’s deed one week after the petition is protected from avoidance as a good-faith purchaser without knowledge or notice under § 549(c), others who participated in the foreclosure sale had notice of the bankruptcy case and 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.).

 

56  In re Stork, 212 B.R. 970, 972 (Bankr. N.D. Cal. 1997) (Annuls stay to validate recording of foreclosure sale deed 16 days after Chapter 13 petition on the theory that purchaser recorded the deed before the debtor recorded notice of bankruptcy, thus purchaser qualifies for protection in § 549(c). Citing In re Garner, 208 B.R. 698 (Bankr. N.D. Cal. 1997), “section 2924h(c) of the California Civil Code provides that, if a foreclosure sale deed is recorded within fifteen days of a foreclosure sale, the sale is deemed perfected at 8:00 a.m. on the day of the sale. . . . Pursuant to 11 U.S.C. § 362(b)(3), an act to perfect an interest in property does not violate the automatic stay to the extent that the trustee’s rights and powers are subject to such perfection under 11 U.S.C. § 546(b). . . . Therefore, recordation of a foreclosure sale deed within fifteen days of the sale does not violate the automatic stay and is not avoidable pursuant to 11 U.S.C. §§ 544 or 549.” However, here purchaser’s deed was recorded 16 days after the foreclosure sale without obtaining relief from the stay. “[I]f a foreclosure sale purchaser does not qualify for protection under section 2924h(c) of the California Civil Code, it may still be protected by 11 U.S.C. § 549(c). Such is the case here. . . . Section 549(c) protects a purchaser regardless of the number of days after the sale the purchaser records the deed as long as the deed is recorded before notice of the bankruptcy filing is recorded. . . . The automatic stay will be annulled to validate the post-petition recordation of the Deed.”).

 

57  511 U.S. 531, 114 S. Ct. 1757, 128 L. Ed. 2d 556 (1994).

 

58  296 B.R. 537 (Bankr. N.D. Ga. 2003).

 

59  11 U.S.C. § 542(c).

 

60  See Patterson v. Chrysler Fin. Co. (In re Patterson), Nos. 99-35259DWS, 00-0258, 2000 WL 1692838, at *6 (Bankr. E.D. Pa. Nov. 2, 2000) (unpublished) (Applying United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983), “§ 542(a) grants to the estate a possessory interest in property of the debtor that was seized by a creditor prior to the filing of the debtor’s bankruptcy petition”; that right of possession will support an action for sanctions for violation of the automatic stay unless the exception for a transferee [sic] in good faith without knowledge applies under § 542(c). Evidentiary hearing is necessary to determine whether § 542(c) applies.), after trial, 263 B.R. 82 (Bankr. E.D. Pa. 2001) (Chrysler willfully violated the automatic stay by refusing return of the debtor’s car and selling the debtor’s car with actual knowledge of the Chapter 13 petition. Chrysler also violated Pennsylvania Unfair Trade Practices and Consumer Protection law by refusing to reinstate and return the debtor’s car after she had done all that its notice of repossession required.).

 

61  In re Donovan, 266 B.R. 862, 869 (Bankr. S.D. Iowa 2001) (“By its plain language, § 542(c) protects only parties holding estate property at the commencement of the case from liability for transferring the property in good faith. It does not protect transferees receiving the estate property.”).

 

62  11 U.S.C. § 362(b)(3).

 

63  11 U.S.C. § 546(b)(1)(A) & (B).

 

64  248 B.R. 820 (B.A.P. 9th Cir. 2000).

 

65  248 B.R. at 822 (“Pursuant to section 2924h(c), a foreclosure sale purchaser who records its deed within fifteen days of the foreclosure sale will prevail over someone who purchases the real property from the debtor after the foreclosure sale even if that person records its deed first. Therefore, the recordation of a foreclosure sale deed within fifteen days of the sale does not violate the automatic stay and is not avoidable pursuant to 11 U.S.C. §§ 544 or 549.”).

 

66  251 B.R. 95 (B.A.P. 9th Cir. 2000).

 

67  251 B.R. at 100.

 

68  The postconfirmation aspects of this issue are discussed further in § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

69  184 B.R. 799 (B.A.P. 9th Cir. 1995), rev’d, 101 F.3d 618 (9th Cir. 1996).

 

70  184 B.R. at 803.

 

71  See In re Roach, 660 F.2d 1316 (9th Cir. 1981).

 

72  See, e.g., In re Sheldon, 196 B.R. 551, 552–53 (Bankr. W.D. Wash. 1996) (Sustains mortgage holder’s objection to confirmation on the ground that the plan does not include “anti-Peters” language. In Peters v. Mason-McDuffie Mortgage Corp. (In re Peters), 184 B.R. 799 (B.A.P. 9th Cir. 1995) [later rev’d, 101 F.3d 618 (9th Cir. 1996),] “the Ninth Circuit Bankruptcy Appellate Panel held a lender’s postconfirmation continuances of its nonjudicial foreclosure sale violated the automatic stay, and stated that the prepetition defaults were cured on the confirmation of the debtor’s plan . . . . [I]ts conclusion has provoked numerous objections to confirmation. . . . Peters is on appeal to the Ninth Circuit. I am aware of Judge Glover’s conclusion that Peters is wrongly decided, and that anti-Peters language is unnecessary. . . . In re Brooks, No. 95-08776 . . . . Neither party points to any basis in the Code for inclusion or exclusion of the language requested by BancBoston. . . . A mechanical application of Peters would increase a lender’s time to realization after a postconfirmation default when a nonjudicial foreclosure sale has been noticed prepetition, because of the unavailability of a continued or short-noticed nonjudicial foreclosure sale. . . . Peters analysis would reduce the state law cure amount. . . . [T]hese effects will tend to reduce and delay lenders recoveries, effectively increasing their costs, and pushing them to scrutinize Chapter 13 plans more rigorously . . . . Lenders will compensate by marginally increasing interest rates and other charges . . . an by objecting on good faith and feasibility grounds more frequently in Chapter 13 cases. To avoid these adverse impacts on borrowers, lenders, and judicial economy . . . BancBoston’s objection is SUSTAINED.”).

 

73  See William v. Pollard (In re William), 192 B.R. 207, 210 (Bankr. D. Ariz. 1996) (Because acts in violation of the stay are void in the Ninth Circuit, see Schwartz v. United States (In re Schwartz), 954 F.2d 569 (9th Cir. 1992), 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. Applying Peters v. Mason-McDuffie Mortgage Corp. (In re Peters), 184 B.R. 799 (B.A.P. 9th Cir. 1995) [later rev’d, 101 F.3d 618 (9th Cir. 1996),] “confirmation of the plan cured the pre-petition defaults thereby removing the basis for proceeding on the pre-petition trustee’s sale.” Prior to petition, mortgagee scheduled foreclosure sale. Sale was continued 17 times, including five continuances after confirmation of plan. Debtor defaulted, and order was entered dismissing case. After dismissal, mortgagee conducted foreclosure sale. After the sale, debtor cured delinquencies under the plan, and an order was entered reinstating the case. Section 349 does not validate post-dismissal foreclosure sale because the chain of valid continuances was broken at confirmation, and subsequent continuances were void.); Fritz v. Washington Mut. (In re Fritz), 188 B.R. 438 (Bankr. E.D. Wash. 1995) (Notwithstanding First National Bank of Anchorage v. Roach (In re Roach), 660 F.2d 1316 (9th Cir. 1981), mortgage company that publicly proclaimed continuance of nonjudicial foreclosure sale after filing of Chapter 13 case intentionally violated stay and is subject to damages under § 362(h). Innocent third-party purchaser at foreclosure sale did not violate stay and is protected from loss by requirement that first proceeds of resale or property be applied to purchaser’s claim for the purchase price.).

 

74  Barry v. BA Properties, Inc. (In re Barry), 201 B.R. 820, 823–26 (C.D. Cal. 1996) (Peters v. Mason-McDuffie Mortgage Corp. (In re Peters), 184 B.R. 799 (B.A.P. 9th Cir. 1995) (later reversed, 101 F.3d 618 (9th Cir. 1996)), is wrongly decided. Mortgage holder did not violate stay by continuing foreclosure sale after filing and confirmation of Chapter 13 plan. However, because the debtor did not have notice of the trustee’s motion to dismiss and because dismissal was based on erroneous information about the debtor’s payment history, equitable principles require the bankruptcy court to void foreclosure sale that occurred after dismissal and before reinstatement. “The bankruptcy court did not err in refusing to apply [Peters v. Mason-McDuffie Mortgage Corp. (In re Peters), 184 B.R. 799 (B.A.P. 9th Cir. 1995), rev’d, 101 F.3d 618 (9th Cir. 1996)] . . . . [A] post-confirmation postponement does not violate the automatic stay. The Ninth Circuit has held that a creditor may postpone a foreclosure sale after a debtor files a bankruptcy petition without violating the automatic stay. [First National Bank of Anchorage v. Roach (In re Roach), 660 F.2d 1316 (9th Cir. 1981).] . . . . The Ninth Circuit Bankruptcy Appellate Panel has held that ‘[t]he confirmation of a chapter 13 plan immediately acts to cure any defaults’ . . . . [T]he theory that confirmation of a Chapter 13 plan immediately cures defaults is wrong. . . . Language allowing a plan to provide for a cure of default ‘within a reasonable time’ is not consistent with the holding that a cure occurs when the bankruptcy court confirms the plan. . . . [B]y ignoring equitable grounds for reversing the sale, the bankruptcy court committed a plan error. Injustice will result. . . . [The debtor] made all of the postconfirmation payments that he owed. . . . [H]e had no notice of the sale or dismissal. . . . Because Barry did not receive notice of the motion, he was unable to inform the bankruptcy court that he had been making timely payments. These arguments show that the bankruptcy court clearly erred in failing to reverse the sale.”).

 

75  101 F.3d 618, 618–19 (9th Cir. 1996) (quoting In re Barry, 201 B.R. 820 (C.D. Cal. 1996)). Accord In re Fine, 285 B.R. 700, 702–03 (Bankr. D. Minn. 2002) (Postponement of foreclosure sale by notice and publication after the Chapter 13 petition is not a violation of the automatic stay. “Postponement of a foreclosure sale is certainly an act, but it is not a continuation of a proceeding against the debtor prohibited by § 362. . . . Rather, it is better characterized as an act in preservation of a stayed proceeding.”); Roche v. Franklin First Fed. Sav. Bank (In re Roche), 228 B.R. 102, 103 (Bankr. M.D. Pa. 1998) (Mortgage holder did not violate stay by postponing foreclosure sale after filing of Chapter 13 case and debtor had no damages even if announcement of continued sale was a violation of the stay. “As to whether the postponement of a sale in accordance with state law procedure during the pendency of the automatic stay is a violation of the automatic stay, every court that has studied this specific issue (and not been reversed) has found no violation.”).

 

76  660 F.2d 1316 (9th Cir. 1981).

 

77  660 F.2d at 1318.

 

78  See Carl I. Brown & Co. v. Anderson (In re Anderson), 195 B.R. 87, 90, 91 (B.A.P. 9th Cir. 1996) (Foreclosing mortgage holder need not renotice scheduled foreclosure sale. Chapter 13 case was filed before foreclosure sale and dismissed before sale for failure to file a mailing list. One day before scheduled sale, debtors move to reinstate. Property is sold as originally scheduled. After sale, the motion to reinstate is denied. Second motion to reinstate is granted after the recording of the trustee’s deed. Distinguishing In re Acosta, 181 B.R. 477 (Bankr. D. Ariz. 1995), and Tome v. Baer (In re Tome), 113 B.R. 626 (Bankr. C.D. Cal. 1990), “[i]n this instance, the state mechanism for continuing the foreclosure sale by public declaration was not invoked. Therefore, we decline to address the due process issue. . . . An intervening bankruptcy, without more, is not sufficient to call into question the effectiveness of notice for a scheduled trustee sale following dismissal of the debtor’s case where the sale occurred on the original scheduled date. As such, the context presented here is different from Acosta and Tome, both of which involved continued foreclosure sales.”); Macalma v. Bank United of Tex., 192 B.R. 751, 753–54 (N.D. Cal. 1995) (Neither California law nor the Bankruptcy Code requires mortgagee to republish notice of foreclosure sale after grant of relief from stay. Debtor filed Chapter 13 case on August 8. foreclosure sale scheduled for August 9 was postponed on an announcement by the auctioneer at the scheduled sale. In January of the following year, Chapter 13 case was converted to Chapter 11. Mortgagee was granted relief and proceeded with foreclosure sale based on the announced postponements. “[B]ankruptcy courts have split on the issue of whether a debtor must be given notice of a continued sale date following postponements caused by a bankruptcy filing. See In re Tome, 113 B.R. 626 (Bkrtcy. C.D. Cal. 1990) (republication required); Houston v. First American Capital Bank, 123 B.R. 869, 874 n.6 (Bkrtcy. C.D. Cal. 1991) (disagreeing with Tome’s conclusion and finding that in the absence of Federal law on point, applicable state law must be applied); In re Ellis, 60 B.R. 432, 436 (B.A.P. 9th Cir. 1985) (concluding in dictum that republication would be required) . . . . [W]ithout explicit authority to the contrary, this court is unwilling to say that either written notice or republication is required under federal law.”); G.E. Capital Mortgage Servs., Inc. v. Thomas (In re Thomas), 194 B.R. 641, 646, 651 (Bankr. D. Ariz. 1995) (Pro se debtors’ third Chapter 13 case reinstated after dismissal was not pending when creditor completed its continued foreclosure sale, thus reinstatement does not void or upset that sale. “Although the Debtors made a sufficient showing at an ex parte motion that their case be reinstated, they did not make any showing or carry their burden of proof that the . . . order of dismissal should have been rescinded or set aside.” Court declines to follow Tome v. Baer (In re Tome), 113 B.R. 626 (Bankr. C.D. Cal. 1990), which held that a secured creditor was required to republish its notice of foreclosure and give a new notice to the owner of the property before foreclosure sale with respect to real property that was property of the bankruptcy estate. That the trustee’s sale was continued a number of times during the Chapter 13 case did not justify requiring any additional notice of foreclosure from the mortgage holder. “Based upon this record, the Court concludes that it shall not reexamine its May 22, 1995 order, which refused to avoid the trustee’s sale of the Debtors’ property, on the grounds that the automatic stay should have been retroactively reimposed as of March 28, 1995, the date the Debtors filed their motion to reinstate, or retroactively reimposed as of the filing of the Chapter 13 petition in this case.”); In re Stober, 193 B.R. 5, 10 (Bankr. D. Ariz. 1996) (In dicta, declines to follow In re Acosta, 181 B.R. 477 (Bankr. D. Ariz. 1995). “Acosta . . . held that, in spite of Arizona deed of trust law which allows continuances of published trustee’s sale notices to be orally announced from time to time, a debtor with a pending motion to reinstate a dismissed bankruptcy, or even a debtor whose case has simply been dismissed, is entitled to actual notice from the creditor before a foreclosure can occur . . . . This court will not impose additional noticing requirements upon it, other than what is required by Arizona law.”).

 

79  See In re Townsville, 268 B.R. 95, 125 (Bankr. E.D. Pa. 2001) (Citing Taylor v. Slick, 178 F.3d 698 (3d Cir. 1999), cert. denied, 528 U.S. 1079, 120 S. Ct. 797, 145 L. Ed. 2d 672 (2000), continuation of foreclosure sale by oral announcement did not violate the automatic stay “because it merely preserved the status quo”; however, publishing postponement notices in newspaper may have violated the stay because the cost of publication was added to the amount of the foreclosure judgment.); Hart v. GMAC Mortgage Corp. (In re Hart), 246 B.R. 709, 740 (Bankr. D. Mass. 2000) (“[T]his Court concludes that the First Circuit in all likelihood would follow the Ninth and Third Circuits in holding that the mere postponement of a foreclosure sale for three months preserves the status quo and does not violate the automatic stay.”).

 

80  197 B.R. 721 (M.D. Ga. 1996).

 

81  See 15 U.S.C. § 1692g.

 

82  See § 77.1 [ Sanctions or Contempt? ] § 62.3  Sanctions or Contempt?.