Why?

I get this question a lot from bankruptcy attorneys and from clients.  Why, for example, does a creditor who repossesses a vehicle in violation of the automatic stay fail to return it immediately upon demand?  Or, why does a collection agency or creditor continue to send and make demands after being told of the bankruptcy?  Are they intentionally violating the automatic stay?

Well, the answer is often no.  They are not intending to violate the stay.  It is usually based upon institutional arrogance.  No one person is handling the entire matter, the person who is confronted with the issue does not have the complete authority, training, experience, or will to stop what is happening.  The person taking the demand to stop hears so many complaints and explanations it just goes in one ear and out the other.  One cog is given instructions on how to perform and it dare not do anything else.  Sometimes it is based upon a misunderstanding of the law or the remedies available to the creditor or collector, the creditor or collector dares to rely on its own instincts and not consult a bankruptcy attorney as to whether it is right in its assumptions.  A creditor or collector too often finds it is fine to rely on its own opinion that requires you or your attorney to prove them wrong.

What does not help is that many of the misconceptions harbored by creditors and collectors are not as a result of bad legal advice.  It is a result of bankruptcy attorneys continually letting them off the hook for past indiscretions.  I cannot tell you how many times, especially from carry-the-note car lots, I have heard the refrain that I have always done this in the past and I never got sued.

The good news is that an aggrieved debtor does not have to prove (or for that matter disprove) the intend to the creditor or collector who violated the automatic stay.  This is the willfulness standard, and it is followed by nearly every jurisdiction in the country.  Under 11 U.S.C. § 362(h) of the pre-BABCPA Code, or 11 U.S.C. § 362(k) of the post-BABCPA Code, damages are mandatory, including attorneys' fees and costs upon the finding that (1) one or more of the automatic stay provisions of 11 U.S.C. § 362(a) were violated, (2) there is not an exception for the action pursuant to 11 U.S.C. § 362(b), (3) the creditor or collector had notice of the bankruptcy filing, and (4) the creditor intended the action it undertook to violated the automatic stay.

There are two important distinctions in regard to these elements.  The first, is that if a creditor or collector repossessed a car, for example, you only have to show it intended to repossess the car.  You do not have to prove it knew or believed they were or were not violating the automatic stay.  This just does not matter.

The second issue is that there are NO GOOD FAITH DEFENSES allowed to explain the conduct.  Le me repeat that.  There are NO GOOD FAITH DEFENSES allowed to explain the conduct.  So, for example, it does not matter if the creditor or collector thought it was not violating the stay, or thought it had a right to violate the stay, or was advised by legal counsel that it was okay to do what it did, or had gotten away with the conduct before.

Many courts simply do not like to admit it, but 11 U.S.C. § 362(h) or (k) are strict liability statutes.  You only have to prove  up the objective facts related to the elements stated above.  You do not have to prove up or disprove why it happened.  The Courts should not be concerning themselves with why something happened for the determination of actual damages, including attorneys' fees and costs.