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Keywords

damagesattorneywillbankruptcychapter 13 bankruptcypunitive damageslevy

damageswillbankruptcypunitive damageslevy

Related Cases

In re Gault, 136 B.R. 736

Facts

The debtor filed for Chapter 13 bankruptcy on August 18, 1989, and her plan was confirmed on April 10, 1990. The IRS was listed as a creditor and had filed claims for income taxes due for the years 1986, 1987, and 1988. After the debtor's attorney notified the IRS of a violation of the automatic stay, the IRS issued a corrected lien. However, in March 1991, the IRS sent notices of intent to levy to both the debtor and her husband, which the debtor contended violated the automatic stay and codebtor stay.

The debtor commenced her bankruptcy case under Chapter 13 on August 18, 1989. On April 10, 1990, the court confirmed her Chapter 13 plan. She listed the IRS as a creditor in her schedules and the IRS timely filed claims for income taxes due for calendar years 1986, 1987, and 1988.

Issue

Did the IRS' sending of notices of intent to levy constitute a violation of the automatic stay under 11 U.S.C. § 362?

Rule

The automatic stay under 11 U.S.C. § 362(a)(1) and (6) prohibits any act to collect a claim against the debtor that arose before the commencement of the bankruptcy case.

The former subsection acts as a stay of: the commencement or continuation, including the issuance or employment of process, of judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; 11 U.S.C.A. § 362(a)(1) (West Supp.1991).

Analysis

The court determined that the IRS' actions in sending the notices of intent to levy were willful violations of the automatic stay. Despite the IRS' claim that the notices were intended only for the debtor's husband, the court found that the IRS was aware of the bankruptcy filing and had previously corrected a notice to comply with the stay. The act of sending the notices to the debtor was deemed a deliberate violation of the stay.

This court has held that “the willfulness requirement refers to the deliberateness of the conduct and the knowledge of the bankruptcy filing, not to a specific intent to violate a court order.”

Conclusion

The court held that the IRS' actions constituted a willful violation of the automatic stay, awarding the debtor $2,500 in punitive damages and attorney's fees.

The court finds that the circumstances of this case warrant an award of punitive damages.

Who won?

The debtor prevailed in the case because the court found that the IRS willfully violated the automatic stay, warranting damages.

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