Opinion
24-31402-pes
02-27-2025
In Re: Michael Anthony Maxie, Debtor.
MEMORANDUM DECISION ON STAY VIOLATION
PAUL E. SINGLETON, UNITED STATES BANKRUPTCY JUDGE
Michael Anthony Maxie, a chapter 7 debtor, argues that a Creditor, Prosper Apartments, violated the automatic stay. He asks for sanctions. The Court held an evidentiary hearing on February 4, 2025. Maxie appeared. Prosper did not appear. Prosper was served with notice of the hearing. For the reasons explained below, the Court finds that Prosper should be sanctioned.
Facts
(1) Maxie filed his petition on October 11, 2024.
(2) Prosper emailed Maxie after October 11 and attempted to collect a debt.
a. In the emails, Prosper listed the balance due and mentioned multiple times that Maxie is "required to pay rent."
b. Prosper stated, "At this time, we request all balance be paid within 10 (ten) days of this notice date."
c. Maxie advised Prosper that the stay was in place, but it insisted on collecting rent.
d. Prosper wrote, "I understand you filed the [automatic] stay, however you are now in default. Payment needs to be submitted."
(3) At trial the Court presented Maxie with several opportunities to state how much he seeks in compensation.
(4) As an example, Maxie stated Prosper's violation of the automatic stay caused him to be depressed.
(5) The Court asked about his depression before Prosper violated the stay and after it violated the stay.
(6) Maxie said he would leave it to the Court's discretion to determine how much of an award is appropriate.
Relevant Law
Bankruptcy courts have the power to determine civil contempt under § 105 and Fed. R. Bankr. P. 9020. Cox v. Zale Delaware, Inc., 239 F.3d 910, 916-17 (7th Cir. 2001). The court has discretion in granting damages for contempt, which may include monetary compensation. In re O'Malley, 601 B.R. 629, 660 (Bankr. N.D.Ill. 2019), affd, 633 B.R. 332 (N.D. Ill. 2021); Std. Indus, v. Aquila Inc. (In re C.W. Mining Co.), 625 F.3d 1240, 1246. The moving party must prove that contempt is appropriate by clear and convincing evidence. In re O'Malley at 660; Stotler and Co. v. Able, 870 F.2d 1158, 1163 (7th Cir. 1989).
At the commencement of a bankruptcy case, section 362 of the Bankruptcy Code forms an automatic stay to prevent efforts of debt collection. In re Radcliffe, 563 F.3d 627, 630 (7th Cir. 2009). The stay prohibits a creditor from taking "any act to collect, assess, or recover a claim ... arose before [the petition.]" 11 U.S.C. § 362(a)(6); In re Kuehn, 563 F.3d 289, 291 (7th Cir. 2009). The Seventh Circuit employs a "coercive test" to determine whether a creditor acts for collection purposes. "A creditor acts to collect a debt if it acts or fails to act, in a coercive manner, with the sole purpose of collecting that debt." Kuehn, 563 F.3d at 292. If a creditor's collection actions are willful, a debtor may be entitled to damages. Radcliffe, 563 F.3d at 631. A willful violation does not require specific intent, only awareness. Id.
Analysis
Maxie has proven by clear and convincing evidence that Prosper knew of his bankruptcy case, yet it still violated the automatic stay. Further, he has shown that sanctions are appropriate. Prosper's actions were coercive, willful, and harassing.
Conclusion
The Court determines a $750.00 judgment in Maxie's favor is an appropriate sanction. Of that amount, $338.00 will be deducted by the Clerk of Court for the balance due on account for the filing of this chapter 7 petition. The remaining $412.00 will be issued to Maxie upon receipt and processing by the Clerk.
The Court now ORDERS:
(1) The Court determines a $750.00 judgment, with interest, in Maxie's favor is an appropriate sanction. Prosper is ordered to pay, in certified funds, $750.00 to the Clerk of Court on or before March 7, 2025. The Clerk is directed to deduct the filing fees totaling $338.00 from this amount.
Rodibaugh Building
401 S. Michigan Street
South Bend, IN 46601
(2) The Clerk must deposit the remaining $412.00 in the United States Treasury Fund #109900.
(3) On or before March 7, 2025, Maxie must provide to the Clerk of the Court proof of his current address. After he provides his address, the Clerk will disburse the balance of the funds to him. If he changes his address, he must provide the Clerk with an updated address within 30 days of the change.
(4) The Court will issue a separate judgment order.
SO ORDERED.