In a recent case a creditor was held liable for willfully violating the automatic stay of a debtor who had recently filed chapter 13 reorganization plan. The peculiar thing about this case is that the creditor violated the automatic stay through inaction rather than committing some type of act that would be a clear violation of the automatic stay. The facts of this case were fairly straight forward in that a debtor had purchased a car but several months later needed to file a chapter 13 petition. In the chapter 13 plan the dealership was to be paid nearly $4,500 for the value of the car and a 7 percent interest rate. However the dealership neglected to give the debtor an existing certificate of title for the vehicle or an application for a new certificate of title indicating the change of ownership.
In response to the neglect of the dealership the debtor filed an adversary proceeding alleging a violation of the automatic stay by preventing him from obtaining title to the vehicle. In response to this the dealership admitted that it never sent the title paperwork to the debtor but alleged that such passive conduct did not violate the automatic stay. However the bankruptcy court found that the creditor dealerships deliberate refusal to send the paperwork constituted a willful stay violation. The court felt that that withholding the title was a powerful collection tool and incentive for the debtor to pay back the remainder of the loan for the vehicle. As a result the court ordered that the dealership submit a new application for a certificate of title and also scheduled a status conference to make a determination for damages. Essentially what all of this means is that inaction as well as willful action on behalf of a creditor could constitute a violation of the automatic stay. Provided that the debtor is hindered in some way the court may even choose to impose damages for such inaction.