stay violation | Carol A. Lawson

The Sixth Circuit modified the foreclosure procedure on August 15, 2015 by Administrative Order. If you have a Bankruptcy client who has had a prior bankruptcy in the same foreclosure suit, the Judges will not stop the foreclosure sale- even if the bankruptcies were more then a year apart and the Stay is valid.

The rationale behind this is that a “void sale” can be set aside later. However, you will need to pay a fee of $53.00 to reopen the case to file your Motion to Set Aside the Sale, and you only have 10 days to file the Motion after the sale! If the bank buys the property and you have notified the bank’s counsel, your client may be safe.

If, a third party with no knowledge of the bankruptcy buys the property, is your client out of luck? Does the filing of the Suggestion of bankruptcy in the Court record constitute constructive notice on the Third Party Purchaser? What about the Fact that a Valid Stay Was Enforced? One of my colleagues has taken this issue to our Tampa Middle District Bankruptcy Judges- stay tune!

Side Note

Apparently, the Clerk’s Office in Seminole County tried a similar move through their internal procedures. A Motion For Sanction was filed against the Clerk’s office.

Motion for Sanctions – Seminole County Clerk

Carol A. Lawson, Esq., 28870 U.S. Hwy19 #300, Hodusa Towers, Clearwater, FL 33761 Phone: (727) 410-2705; email: [email protected]

Consumer debtors claimed violation of the bankruptcy stay based on a “Notice of Sale” that was published in a local newspaper, and in letters that they received from law firms. The sale was canceled but debtors did not learn that until later.

Although two separate motions for relief from stay were filed by two different “creditors”, the motions were never ruled on and the stay remained in effect throughout the bankruptcy proceedings. After discharge, the debtors sued seeking damages under § 362(k) for their emotional distress.

The First, Seventh, and Ninth Circuits have ruled that emotional damages are encompassed within the “actual” damages provision in § 362(k). The Fifth Circuit has indicated agreement with this determination.

The Ninth Circuit set up a test for courts to apply when considering whether a plaintiff can recover damages for emotional distress:

1. the plaintiff suffered “significant harm,” as opposed to “[f]leeting or trivial anxiety or distress”;

2. that significant harm is “clearly establish[ed]”; and

3. there is “a causal connection between that significant harm and the violation of the automatic stay (as distinct, for instance, from the anxiety and pressures inherent in the bankruptcy process).”

The Ninth Circuit explained that the second part of the test can be covered by corroborating medical evidence or non-expert testimony (family members, friends, or co-workers) about the manifestations of the anguish.

Lodge v. Kondaur Capital Corp., — F.3d —-, 2014 WL 1813298 (11th Cir. May 8, 2014)

Carol A. Lawson, Esq., 28870 U.S. Hwy19 #300, Hodusa Towers, Clearwater, FL 33761 Phone: (727) 410-2705; email: [email protected]