In a recent case out of federal bankruptcy court in California, a judge awarded punitive and compensatory damages to a woman who filed for bankruptcy. This case is an example of how and why it is so important that qualified and talented bankruptcy counsel be used for a bankruptcy filing in California.
Background of Case and Stay Violation
This case began in August when a California woman filed for Chapter 7 Bankruptcy protection under the U.S. Bankruptcy Code. She previously filed for bankruptcy, and her case was dismissed, but she filed again for bankruptcy and was in the process of eliminating her debts when her car payment became due.
Because of her financial situation, she was unable to make her car payments. As a result of non-payment, the note holder of the vehicle began repossession efforts. Unfortunately those efforts were unsavory and borderline illegal. For example, the note holder hired a scurrilous individual to follow the California woman and even attempt to enter her home under the guise of being an officer to obtain the vehicle.
All of these efforts took place while the woman was in an active bankruptcy, and after a stay had been issued by the court. Eventually the note holder took the car from the woman, including all of the documents she kept in the car, including family photos.
Legal Effect of a Stay
These actions were problematic for the noteholder and illegal because when a person files for bankruptcy, an automatic stay is issued against all debt collection efforts. This means that calls, efforts to collect debts, and other actions by debt collectors have to stop. The purpose behind the stay is to allow a debtor to organize his or her estate and report to the court which debts should be discharged in bankruptcy. If it were not for the automatic stay, debt collectors would work even more vigorously during a bankruptcy to collect before the debts are discharged.
Violation of Automatic Stay
After a stay is issued, as it was in this case, violation by a debt collector can result in hefty penalties. Those penalties can include contempt fines, statutory damages, and punitive damages. These monetary rewards are typically awarded to the debtor filing for bankruptcy. This is why hiring the right legal team to handle a bankruptcy is so important; it takes knowledgeable, experienced legal counsel to know when a stay has been violated and how to proceed against violators.
That is what happened in this case. The debt collectors violated the stay by continuing their efforts to repossess the California woman’s car, and stalk her for payment of a debt. It led to the court issuing a lengthy court opinion, and awarding tens of thousands of dollars to the woman.
Your California Bankruptcy Legal Counsel
At The Bankruptcy Law Center our legal professionals fight to ensure that all the rights afforded to those filing for bankruptcy are protected. If you are facing the prospect of filing for bankruptcy, contact our legal team today.
(image courtesy of Alex Gilliott)