Central District Consumer Bankruptcy Attorney's Association

I am feed up with having to spend extra time addressing creditors that ignore the bankruptcy case commencement notices, especially the sophisticated creditors that should know better. Usually after one letter they stop sending bills/collection notices. Nevertheless it takes at least 30-45 minutes in hand holding the client and then writing the letter after finding out details from the client. Calling never seems as effective and then there is no paper trail.... This additional time is really not covered by the flat fee agreement with the clients, yet it does not seem right to victimize the client twice by charging the client extra for this time. On the other hand I should not have to write off my time when it is entirely the fault of the creditor for willfully violating the stay after being provided proper notice of the case filing.
Where do we draw the line? Does this fall in the no good deed goes unpunished category? Literally per the code, under section 523(k)(1) a creditor should be found in contempt and sanctioned for debtor's attorney fees even if the creditor merely sends only one bill after receiving a properly addressed notice of case commencement and the debtor suffered no other damages. That would seem a bit extreme during the first few weeks of the case when creditors' right hand has not communicated with the left, but what about a month or two or three afterwards. The creditor has an absolute duty to heed the automatic stay if provided notice to the proper address. There simply are no valid excuses for a stay violation. There may be mitigation of punitive damages, but that is a different issue. I have successfully pursued stay violation cases when creditors ignored several communications from me and I have pursued them without any communications from me after the notice of commencement when the facts appeared outrageous. It is the middle ground that I struggle with. Obviously to lay the groundwork for punitive damages it is best to have multiple communications ignored, but who wants to spend that time without being paid for it? Who wants to spend the time to pursue just attorney fees when there is a small chance the judge could deny the motion or more likely cut the amount of compensated hours? It is not as though we can send a bill to the violating creditor and expect it to be paid.
For example: Chapter 7 Notice was sent to the correspondence address listed as such on the credit card bills for credit union. Creditor continues to send bills in violation of the automatic stay. Debtor being easily intimidated continued to make minimum payments for several months until finally mentioning it to attorney wondering how much longer he would have to pay.... Attorney informs client (again) to stop making payments and client provides offending statements and evidence of money paid to creditor post-petition. Attorney writes credit union, again to the correspondence address still listed on all the bills, demanding it cease and desist collection efforts and demanding refund be paid within two weeks. No response is forthcoming. Only an additional bill arrives in client's mail box. Attorney prepares motion seeking order to hold Credit Union in contempt for violation of the automatic stay. While finalizing the motion 6 weeks after corresponding to the credit union the mail arrives with the refund check and explanatory correspondence from the credit union. Said correspondence states the credit union corrected the error that allowed monthly statements to continue to be mailed, but asserting it did honor the automatic stay by not contacting the member. (Apparently its interpretation of contacting does not include billing) The letter further went on to state it was of course the debtor's fault for not contacting them to inform them his lawyer told him not to pay because of the bk. Some of their customers like to pay anyway so they need to be informed otherwise.... Finally the letter also asserted that the correspondence address listed on the bill is the credit union's payment processing center so that the lawyer's letter was not received until 5 weeks after being sent because it had to be forwarded to the credit union's actual office.
It is a clear stay violation as creditor was properly noticed at the stated correspondence address on the bill and yet it still willfully sent out invoices to the debtor. Despite its attempts to deflect blame to the very unsophisticated debtor for not objecting to receiving the monthly bills, I see it as 100% credit union's fault for ignoring the case commencement notice. Lawyer should never have been required to invest any time dealing with the issue. Now that the debtor's post petition payments were returned, there is only the cost of the debtor's postage, the relatively thin argument about emotional distress compensation and then attorney fees to request for debtor's actual damages. Although the creditor's explanation and finger pointing are preposterous it looks more like incompetence than an orchestrated effort to ignore automatic stay and intimidate the unsophisticated debtor. Punitive damages appear to be a stretch. Most of the damages would be for the time spent filing and prosecuting the Motion for the Court to issue an OSC re: contempt.
Where is the right place to draw the line in pursuing contempt sanctions under Local Rule 9020-1?

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