BK COURT AWARDS

BK COURT AWARDS $10,000 PUNITIVE DAMAGES AND $2,500 FOR LOSSOF SLEEP FOR STAY VIOLATION

When debtor files for bankruptcy relief, the law creates an injunction that protects the debtor and his assets from collection efforts from creditors. Creditors must stop all collection efforts, including lawsuits, garnishments, levies, letters, and phone calls. All creditors of debtor receive a copy of the notice of case commencement which tells them that they have to stop all collection efforts. If creditor insists on continuing collection efforts, debtor can file a motion in bankruptcy court to have creditor declared in contempt of the court injunction against further collection efforts( violation of the automatic stay), and request for punitive damages against creditor if the violation is willful and malicious.

In Re Coopersmith, debtors owned and operated IPS Construction Inc., a company that provided general construction contracting services. IPS purchased some of its building supplies from M. G. Brown, a division of Foreman's Inc., on credit. The debtor husband personally guaranteed payment on the M.G. Brown account. After IPS defaulted on the account, M. G. Brown obtained a state court judgment for $4,951.16. The debtor husband attended the hearing and asked for an accounting of the amount owed. M.G. Brown did not provide that accounting, and the debtor appealed.
 
The matter was referred to arbitration. The debtor did not attend the arbitration hearing, so the arbitrator entered judgment in favor of M.G. Brown for $4,951.16 plus a $50 arbitration fee. When the debtors filed for Chapter 13 relief on June 1, 2011, they listed M.G. Brown as a creditor. On June 30, M.G. Brown, through Clay B. Foreman Sr., President of Foreman's Inc., mailed an account statement to IPS. Foreman handwrote on the invoice:"Added the $50 Arbitration fee to your total as stated by judge @ court hearing you have paid attorneys to delay paying your M.G. Brown bill! Your choice as I'm certain, attorneys appreciate it!"
 
The debtors contacted their lawyer, who sent a letter to M.G. Brown explaining that the debtors filed for bankruptcy so they were protected from attempts to collect prepetition claims. M.G. Brown denied receiving the letter (must have used the wrong zip code).

In August 2011, M.G. Brown sent a second invoice to IPS. This time it was for $5,053.37. Again, Foreman included a handwritten note. "Promised to make monthly payments!" but spent MONEY ON ATTORNEY, spent MONEY ON COURT SYSTEM Result = Expect you will pay attorney-up front to help you file bankruptcy! Clay Foreman". Then, in September 2011, M.G. Brown mailed a third invoice to IPS. This time it was for $5,105.35. Foreman added: "You have paid attorneys - UP FRONT instead of paying portion monthly! Your statement at small claims court of son, accepting your offer of paying a little MORE when you could rings hollow as I suspected! Judgment recorded PRIOR to your filing bankruptcy."

The debtors said the invoices caused them to experience anxiety and sleepless nights. Debtors sued M.G. Brown alleging that the company willfully violated the automatic stay. M. G. Brown responded that any violation of the stay was inadvertent, and that the bills were not sent to the debtors but were sent to their company, which the debtors operated from their home.
 
At the hearing, Foreman testified that neither M.G. Brown nor Foreman's Inc. had a procedure for handling bankrupt accounts. Foreman said he was unaware of the debtors' bankruptcy when he wrote the notes on the invoices. His references to paying attorneys were based on his assumption that this was what the debtors were doing. But the court did not believe Foreman's explanation. "The handwritten notes on the account statements suggest Mr. Foreman …had knowledge the debtors actually filed a bankruptcy petition. The notes reference hiring an attorney, payment of legal fees, and filing for bankruptcy," the court said and found that Foreman knew the debtors filed for bankruptcy.
 
The court awarded debtors punitive damages of $10,000 because M.G. Brown willfully and maliciously sent handwritten, personal notes to debtors. It also awarded debtors' attorney's fees of $2,500, and another $2,500 for their loss of sleep and increased anxiety.