Bankruptcy Cases in the News
In past blogs we have discussed the importance of the automatic stay, 11 USC 362 to the debtors fresh start and efforts to reorganize and get on with their lives. In a recently decided case from the U.S. Bankruptcy Court Eastern District of Louisiana, Judge Magner traced the importance of the automatic stay to debtors and severely punished a secured creditor, Wells Fargo (WF), for violating it. In this Chapter 13 case the judge found that WF willfully violated 11 USC 362, the automatic stay when it:
“Charged Debtor’s account with unreasonable fees and costs; failed to notify Debtor that any of these post-petition charges were being added to his account; failed to seek Court approval for the same; and paid itself out of estate funds delivered to it for payment of other debt.”
Accordingly in this case Michael L. Jones v. Wells Fargo Mortgage, Inc., 06-1093 (Eastern District of Louisiana) the court determined that there were very serious violations. As discussed in other blogs, the automatic stay is a central feature in assuring that the debtor gets a fresh start. In their case the creditor’s actions failed to allow the debtor a fresh start by wrongfully misapplying his payments to penalties, late fees and other costs WF was not entitled to.
In addition to the wrongful conduct WF apparently never conceded its violation but dug in and over litigated and filed appeals with dubious merit. The Court also believed that WF had treated other debtors wrongfully, too, in other cases. Therefore, Judge Magner held that not only were full compensatory damages due to debtor for all loses and attorney fees, but also punitive damages too. The opinion stated, in part:
“Section 362(k) allows for the award of actual damages, including costs and attorneys’ fees, as a result of a stay violation, and punitive damages “in appropriate circumstances.” Punitive damages are warranted when the conduct in question is willful and egregious, or when the defendant acted “with actual knowledge that he was violating the federally protected right or with reckless disregard of whether he was doing so.” There is no question that Wells Fargo’s conduct was willful. As previously decided Wells Fargo clearly knows of Debtor’s pending bankruptcy and was represented by bankruptcy counsel in the case. Wells Fargo is a sophisticated lender with thousands of claims in bankruptcy cases pending throughout the country and is familiar with the provisions of the Bankruptcy Code, particularly those regarding the automatic stay.”
Judge Magner under the egregious circumstances of the case awarded to debtor $3,170,000.00 in punitive damages. This was done because WF’s behavior was reprehensible having caused 5 years of litigation; and, clandestine hiding its misconduct and failing to make voluntary corrections of its errors. It demonstrated “an arrogant defiance of Federal law.”
The Judge determined that based on all the circumstances that such a large award should be imposed to discourage future misconduct and benefit society at large. Judge Magner noted that the award might also deter others tempted to misconduct in the absence of such a deterrent.
If creditors harass you during your bankruptcy, or after, you should seek legal help immediately.
[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in the city of Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]
