Debtors Win Against Creditor Harassment

Though bankruptcy is often thought of as a negative, it is better thought of as an opportunity to stop creditor harassment.  An opportunity provided by the law because of a belief that sometimes debt can reach a point where it is nearly debilitating and that individuals and businesses can benefit from a fresh start.

Creditor Harassment

Perhaps the most stress relieving privilege that bankruptcy grants is the automatic stay.  As discussed in earlier blogs, the automatic stay is an automatic court order preventing creditor harassment or any actions to  try to collect a debt once a debtor files for bankruptcy.  Though most creditors play by the rules, some don’t, but when they don’t debtors can bring an action against them.

That’s exactly what happened in in re: Stellato.  In that case, the debtor, Stellato, and his company, a grocery store, obtained a loan from a creditor, Den-Cut to purchase restaurant equipment.  When the debtor fell behind on payments, the creditor demanded that it be paid in full and when it wasn’t tried to repossess the equipment that the loan had financed.  On two occasions, the creditor sent its employees to the debtors business to attempt to take the equipment.

On the first try, they were sent back by police officers because they lacked the required paperwork.  The creditor  harassment did not stop there. They went to court and obtained the orders necessary to repossess the equipment.  Following this but before a further attempt to obtain the equipment, the creditor’s attorney was notified that the debtors had declared bankruptcy.  The creditor company’s manager never the less ordered its employees to repossess the equipment.  When one employee noted that he believed that they weren’t allowed to do so becuase a bankruptcy case had been filed, the manager responded “ “F*** the stay, I want my equipment. If you can’t handle that go work someplace else. You work for me.”

The creditors employees did attempt to repossess the equipment and though they were stopped midway, they created a lot of damage in the process.  They broke through a drive through window, left food all over the floor, and damaged equipment.

The debtor brought an action for violation of the automatic stay seeking compensation for the damage caused by the creditor harassment as well as punitive damages.  Punitive damages are a monetary award that seeks to punish a party for engaging in wrongful conduct and deter others from engaging in similar conduct in the future.  For punitive damages to be awarded for violation of the automatic stay, the creditor must have either known it was violating a protected right or been reckless in its violation.

The Court in In re Stellato was not persuaded by the creditor’s argument that it didn’t know about the automatic stay and relied on the advice of its attorney.  The court awarded punitive damages noting ““the determination of whether the automatic stay applies to any given activity or property is to be made in the first instance by the bankruptcy court, not by a creditor or its attorney.”

If you are suffering from creditor harassment, the Jacksonville bankruptcy attorneys at Adam Law Group are available to talk to you about your options and rights and if you decide to file, can help ensure that creditors play by the rules and respect your federally protected right to an automatic stay.