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Bankruptcy Court Reduces Damages Due To Pre-Bankruptcy Misbehavior

Posted By admin || 22-Nov-2011

Bankruptcy Court Reduces Damages Due To Pre-Bankruptcy MisbehaviorIn a recent Chapter 13 bankruptcy case, the bankruptcy court significantly reduced both damages and attorney's fees awarded to a debtor who was the victim of an automatic stay violation.  The bankruptcy court argued that the debtor engaged in behavior that contributed to his own large amount of legal fees and that his pre-bankruptcy behavior aggravated the situation.

R.D. Affordable Foreign Auto Repair ("R.D. Auto") repossessed Jackson's automobile prior to bankruptcy. Jackson owed R.D. Auto money for services performed on the automobile. Ware, owner of R.D. Auto, went to extraordinary lengths to accommodate Jackson's precarious financial situation, but eventually repossessed the automobile for nonpayment. Jackson paid nothing on the amount owed for many months prior to bankruptcy, despite being employed. Simply put, Jackson took advantage of Ware's kindness and, understandably, Ware eventually became quite upset. This does not excuse Ware's refusal to turn over the automobile after Jackson filed for bankruptcy. Ware's violation of the automatic stay was egregious-at one point disregarding a court turnover order until a United States Marshall appeared to retrieve the automobile.

Jackson, the debtor, requested over $25,000 in legal fees due to the adversary proceeding; but his award was reduced to a mere $7,000.  This is mostly because the bankruptcy court felt that he had abused the system before and after filing bankruptcy.  The court went on to insist that the bankruptcy debtor purposefully ran up legal fees and should not be awarded additional money.  Debtors should remain mindful of their behavior before filing bankruptcy as well as how they handle any bankruptcy litigation. If the bankruptcy court senses that the debtor has behaved in an unfair manner with creditors they may award the minimal amount of damages even when a creditor violates the automatic stay.

Categories: Bankruptcy
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