In Re Russell

441 B.R. 859, 2010 Bankr. LEXIS 4769, 2010 WL 5392879
CourtUnited States Bankruptcy Court, N.D. Ohio
DecidedNovember 18, 2010
Docket19-10505
StatusPublished
Cited by11 cases

This text of 441 B.R. 859 (In Re Russell) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Russell, 441 B.R. 859, 2010 Bankr. LEXIS 4769, 2010 WL 5392879 (Ohio 2010).

Opinion

DECISION AND ORDER

RICHARD L. SPEER, Bankruptcy Judge.

This cause comes before the Court after a Hearing on the Debtor’s Motion for Contempt of Court and for Violation of the Automatic Stay. (Doc. No. 10). The Debt- or’s Motion is brought against the Toledo Postal Employees’ Credit Union, Inc., a creditor, and its legal counsel, Thomas Overly. On the Debtor’s Motion, the Court has now had the opportunity to review the arguments submitted by the Parties, both oral and written, as well as the entire record in this case. Based upon this review, the Court finds that the Debtor’s Motion for Contempt of Court and for Violation of the Automatic Stay should be Granted, subject to the limitations set forth herein.

*861 BACKGROUND

The Toledo Postal Employees’ Credit Union holds a judgment against the Debt- or. To enforce its judgment, the Credit Union (hereinafter the “Creditor”) effectuated a wage garnishment with the Debtor’s employer, the United States Postal Services. The order of garnishment was entered by the Lucas County Court of Common Pleas, which continued thereafter to administer the garnishment.

While the garnishment order was in effect, the Debtor filed a petition in this Court for relief under Chapter 7 of the United States Bankruptcy Code. The Debtor filed her petition for bankruptcy relief on May 6, 2010. Contemporaneous with the commencement of her bankruptcy case, counsel for the Debtor provided notice of the bankruptcy filing to Creditor’s counsel, Thomas Overly, and to the Lucas County Court of Common Pleas.

After the commencement of her bankruptcy ease, the Debtor’s wages were garnished on two separate occasions. The first postpetition garnishment was for the amount of $451.00 and occurred on or about May 14, 2010. On May 28, 2010, the Debtor’s wages were again garnished; this time in the amount of $425.00.

At the time of each of these garnishments, Creditor’s counsel was immediately notified of the action. Documentation, however, was not filed by Creditor’s counsel to have the state court release the garnishment until May 28, 2010, after the second postpetition garnishment to the Debtor’s wages had occurred. The Debtor has since been reimbursed all those funds garnished on a postpetition basis.

On June 2, 2010, the Debtor brought the action now before the Court. For her action, the Debtor alleged that, since the commencement of the case, the Creditor and Creditor’s counsel “are in direct violation of the automatic stay by virtue of their failure to take any action to cease and/or withdraw the garnishment proceeding” against her. (Doe. No. 10). Based on these allegations, the Debtor asks the Court to award her the amount of funds wrongfully garnished, plus statutory interest and attorney’s fees and punitive damages pursuant to 11 U.S.C. § 362(k). (Doc. No. 10).

DISCUSSION

The matter before the Court concerns the application of the automatic stay as set forth in 11 U.S.C. § 362. Specifically, damages are sought based upon the Debt- or’s allegation that the Creditor and Creditor’s counsel violated the automatic stay. Determinations concerning a violation of the automatic stay, and an award of damages thereunder, are deemed to be “core proceedings.” Accordingly, this Court has the jurisdictional authority to enter final orders and judgments in this matter. 28 U.S.C. § 157; In re Pawlowicz, 337 B.R. 640, 645 (Bankr.N.D.Ohio 2005).

Upon the commencement of a bankruptcy case, an automatic stay goes into effect. 11 U.S.C. § 362(a). The scope of the stay is broad and operates to enjoin essentially any act, whether the commencement or continuation thereof, by a creditor to collect on a prepetition claim. In re Harchar, 393 B.R. 160, 167 (Bankr.N.D.Ohio 2008). The purpose of the automatic stay is to provide the debtor with some breathing room from creditor’s collection efforts and to “ensure the orderly liquidation of the debtor’s bankruptcy estate.” In re Perviz, 302 B.R. 357, 365 (Bankr.N.D.Ohio 2003).

The scope of the automatic stay is sufficiently broad so as to place an affirmative duty on a creditor garnishing a debt- or’s wages to release the garnishment upon receiving notice of the debtor’s bank- *862 ruptey. In re Scroggin, 364 B.R. 772, 779-80 (10th Cir. BAP 2007); In re Timbs, 178 B.R. 989, 991 (Bankr.E.D.Tenn.1994); In re Dennis, 17 B.R. 558, 560 (Bankr.M.D.Ga.1982). At the same time, it is a familiar maxim that the law does not require vain or useless acts. 1 Contrary, therefore, to the Debtor’s position, it cannot be stated with certainty that a duty to release the garnishment arose on the part of Creditor’s counsel on May 6, 2010, when the Debtor commenced her bankruptcy case and notice thereof was first provided to Creditor’s counsel. This is because contemporaneous with this action, Debtor’s counsel also provided notice of the pending bankruptcy to the court administering the garnishment, an act which one could reasonably construe as sufficient to effectuate a release of the garnishment.

In any event, it is clear that by May 14, 2010, an affirmative duty arose on the part of Creditor’s counsel to take action to release the wage garnishment. On that day, Creditor’s counsel received notice that the Debtor’s wages were still being garnished, notwithstanding that pri- or notice had been provided to the court administering the garnishment. No action, however, was undertaken by Creditor’s counsel to prevent any further wage garnishments until May 28, 2010, after the Debtor’s wages had again been garnished. Based, therefore, upon this sequence of events it can only be concluded that Creditor’s counsel, by failing to take action after May 14 to release the garnishment, violated the automatic stay when Debtor’s wages were again garnished on May 28.

Where a violation of the automatic stay has occurred, a debtor’s ability to recover damages is governed by 11 U.S.C. § 362(k)(l). Under this provision, an award of actual damages is mandatory upon a finding that the violation of the stay was willful. In re Mosher, 432 B.R. 472, 476 (Bankr.D.N.H.2010). Specifically, § 362(k)(l) provides, inter alia, “... an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”

It is well-established that no specific intent is required to sustain a finding that a creditor willfully violated the stay. Harris v. Memorial Hosp. (In re Harris), 374 B.R. 611, 615 (Bankr.N.D.Ohio 2007). Instead, a willful violation of the stay occurs simply “when the creditor knew of the stay and violated the stay by an intentional act.”

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Cite This Page — Counsel Stack

Bluebook (online)
441 B.R. 859, 2010 Bankr. LEXIS 4769, 2010 WL 5392879, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-russell-ohnb-2010.