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Digital Federal Credit Union, in the case of In re Evans, 2008 WL 427259 (Bankr.E.D.N.C. 2008), repossessed the debtor’s vehicle seven months after the case had been filed. The debtor’s lawyer called to get the vehicle returned and was told that it would be done by the end of the day. In spite of repeated phone calls to Digital, the vehicle was not returned for a full month.

So what did the lawyer do? He did the right thing - he filed a motion for sanctions against Digital for violating the automatic stay.

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I don’t usually post about big corporate bankruptcy cases, but this one hit home. Fortunoff, a major Long Island-based retailer, said today it has filed for bankruptcy protection and agreed to be acquired for $100 million by the owners of Lord & Taylor. This is the second change in ownership for the Westbury-based home furnishing and jewelry chain in the past two years.

This seems to indicate that Fortunoff is somehow on the downward spiral, having failed to net the last owner enough profit to keep things going.

One step closer to liquidation of another local retailer? I’m no seer, but this doesn’t look good at all.



Creditors from time to time violate the automatic stay in bankruptcy, contacting a debtor after the case has been filed. In the case of In re Deailey, 2007 WL 4531804 (Bankr.C.D.Ill. 2007) the U.S. Bankruptcy Court was presented with a motion for default against Chase Bank USA, NA for a violation of the automatic stay. The debtor properly listed Chase, so the creditor received notice of the bankruptcy filing. In spite of that fact, Chase sued the debtor nearly two months after the filing of the bankruptcy case.

The debtor filed a lawsuit against Chase seeking damages and legal fees, and Chase failed to answer or appear. The debtor’s attorney presented a request for compensation for $810. In reducing the award to $400, the court noted that the debtor’s lawyer had not attempted to contact Chase prior to filing the case. In so doing, the court noted that the preference is for

debtors and their attorneys to contact the offending creditor by mail or phone before commencing an action for damages. In re Risner, 317 B.R. 830 (Bankr.D.Idaho 2004). Attorney fees awards may be reduced or denied entirely where the debtor fails to make any reasonable effort to request that the creditor withdraw its offending pleading or cease its offending communication before escalating the matter into a “federal case” by immediately initiating an action for damages. Id. There may, of course, be exceptional circumstances where a creditor by the nature of its conduct or the substance of its communication engenders a reasonable belief that a cease and desist request would be futile.

In the case at bar, the DEBTOR did not call or write CHASE before commencing this adversary proceeding. When CHASE received the Complaint and Summons, it took no further action to prosecute its claim and promptly dismissed the state court complaint. This mitigating response indicates that CHASE likely would have dismissed its complaint based upon a communication from the DEBTOR or the DEBTOR’S attorney directly referencing the pending bankruptcy case and CHASE’S violation of the automatic stay.

This is not to say that the stay violation should be entirely excused. CHASE is a large, sophisticated creditor with a wealth of bankruptcy experience. It can be assumed that CHASE has systems in place to make sure that the automatic stay is honored whenever a borrower files for bankruptcy relief. For reasons not a part of the record, those systems failed here and a willful violation of the stay occurred.



Tonya Denise Price owed money to Navy Federal Credit Union before she filed for bankruptcy. She hired a lawyer, who contacted the credit union before as well as after the case was filed. His message was clear: do not contact my client about her debt because it is in violation of the U.S. Bankruptcy Code.

The message could not have been clearer, but apparently it was not heard. In fact, Navy Federal Credit Union contacted Ms. Price 10 times by phone, twice by mail, and once by coming to her home.

What happened next is a study in good lawyering. Ms. Price’s lawyer, Robert Grossbart of Baltimore, MD, filed the case of Price v. Navy Federal Credit Union, in the U.S. Bankruptcy Court for the District of Maryland. The case asserted that Navy Federal Credit Union violated Ms. Price’s rights under the U.S. Bankruptcy Code, which prohibits contact by creditors after the filing of a bankruptcy case.

On January 9, 2008, Bankruptcy Judge Wendelin Lipp order Navy Federal Credit Union to not only pay Ms. Price’s legal fees of $3,464.50 but also ordered this creditor to pay punitive damages in the amount of $10,000 for the blatant disregard of the U.S. Bankruptcy Code.

A copy of the Order can be found here.



Credit reporting agencies typically report bankruptcy information for a period of ten (10) years. This, however, does not mean that your credit rating will remain low for that entire time. Credit scoring takes into account the age of derogatory information, and discounts the value of that information the older it is. Therefore, the more time that passes the less important the bankruptcy will be to your credit score.

It is important to review your credit reports at least every six months to ensure that no incorrect information appears on the reports. For people who went through bankruptcy, the most common error involves creditors failing to update their reporting to indicate that the debt was discharged in bankruptcy and has $0 due.

These errors can be addressed a number of different ways, the most reliable one being through the provisions of the Fair Credit Reporting Act. The requirements for a dispute to be processed properly are very strict, but a failure on the part of the creditor to properly update the report once the errors is brought to its attention can result in a claim for a violation of the bankruptcy discharge, Fari Credit Reporting Act, and a variety of state laws.