California Court Discusses the Award of Attorneys’ Fees For Prosecuting a Violation of a Stay

When a person files for bankruptcy, an automatic stay is entered, preventing creditors from taking further actions to collect debts from the person. Further, the law provides that if a creditor willfully violates a stay, anyone injured by the violation can recover actual damages, which includes attorneys’ fees and costs. As discussed in a recent bankruptcy case arising out of California, in some circumstances, however, a court may decline to grant a person an award of the true costs associated with seeking damages caused by the violation. If you are a resident of California seeking debt relief, it is advisable to speak with a trusted California bankruptcy attorney regarding your options.

Factual and Procedural History

Reportedly, the plaintiff filed for bankruptcy on October 1, 2018. At the same time, she filed a stay of proceedings in pending state court actions. Per the defendant’s admission, it became aware of the bankruptcy petition by October 2, 2018. Regardless, on October 2, 2018, the defendant sent the sheriff instructions to enforce the writ of execution. Although an attorney that worked for the defendant reportedly directed an assistant to advise the sheriff to terminate the levy on October 10, 2018, the sheriff never received notification of the termination and levied funds from the plaintiff’s bank accounts. The plaintiff attempted to withdraw funds following the levy and was charged an overdraft fee.

Allegedly, the plaintiff’s attorney then filed a motion for contempt against the defendant for violating the automatic stay. Following a hearing, the court found that the defendant clearly violated the stay and that its violation was willful. The court then ruled that the plaintiff was entitled to recover reasonable attorneys’ fees and costs, but not the full amount claimed. The plaintiff appealed.

Determining the Reasonableness of Attorneys’ Fees For Prosecuting a Violation of a Stay

Pursuant to the bankruptcy code, a person harmed by a willful violation of a stay may be awarded actual damages caused by the violation, including attorneys’ fees. While the award of attorneys’ fees is mandatory, the courts have determined that only fees that are reasonable will be granted. Thus, a court must assess the circumstances of each case to determine if the fees sought are reasonable, weighing factors such as the proportion of fees in relation to the damages sought.

Additionally, the courts have found that a reasonableness determination requires an evaluation of whether the plaintiff could have mitigated her damages. In the subject case, the court found that the underlying court evaluated the proportionality and reasonableness of the plaintiff’s actions in light of the violation, and found that the issue could have most likely been resolved without court intervention. The court also noted that the fees incurred far exceed the money taken via the levy. The appellate court found that these assertions were supported by the record, and affirmed the lower court’s ruling.

Meet with an Experienced California Bankruptcy Attorney

Creditors are required to refrain from debt collection efforts after a person files for bankruptcy, and if they violate a stay, they may be held accountable for the damages caused by the violation. If you wish to manage your debt via bankruptcy, you should meet with an attorney to discuss your case. Matthew D. Roy is an experienced California bankruptcy attorney who can help you take advantage of the benefits of filing for bankruptcy. You can reach Mr. Roy at (916) 361-6028 or through the form online to schedule a free and confidential meeting.