In a recent case in the Third Circuit the Bankruptcy Court ordered Commonwealth Financial Systems (CFS) to pay damages in the amount of $88,480 for violating an automatic stay and discharge injunction. 4 Years prior to the debtors filing for Chapter 7 Bankruptcy, CFS obtained a judgment for the amount of $23,307.49 against her. Following the entry of the judgment, CFS pursued a contempt action against the debtor. Upon doing so a warrant for the arrest of the debtor was issued. Subsequent to this the debtor filed for Chapter 7 Bankruptcy and listed CFS as her only unsecured creditor, thus initiating the automatic stay.
After her debt was discharged in the bankruptcy, debtor was taken into custody and placed in county jail with several other prisoners and was not allowed to make a phone call for the first 48 hours of her stay. Subsequently in Bankruptcy Court, it was found that CFS willfully violated the automatic stay that was imposed at the moment the debtor filed for bankruptcy. The court found that CFS did so by failing to vacate the civil contempt order that resulted in the debtors warrant for arrest. The court also found that the failure to terminate the warrant for the debtors arrest also violated the discharge injunction.
The resulting lawsuit allowed the debtor to recover a multitude of damages from CFS. Debtor was awarded $1,740 in lost wages, $2,500 in attorney’s fees, $10,000 for plaintiff’s emotional distress, and $30,000 in punitive damages. The damages were awarded separately for each violation thus resulting in an $88,480 award. What all of this means is that it is possible for a creditor to violate an automatic stay for failing to seek a vacation of a contempt order and failing to terminate a warrant for arrest. Depending on the circumstances around the arrest the debtor may be able to recover from the creditor a significant amount of damages for such a violation.