Bank of America did Not violate Automatic Stay by Failing to Cause the Release of Debtor’s Funds held pursuant to Citation Lien

Bank of America did Not violate Automatic Stay by Failing to Cause the Release of Debtor’s Funds held pursuant to Citation Lien

The Debtor in this chapter 13 case, filed a motion for sanctions under 11 U.S.C. § 362(k) against Bank of America for an alleged violation of the automatic stay. Debtor argues that Bank of America willfully violated the automatic stay by refusing to take affirmative steps to release funds in her bank accounts at JP Morgan Chase Bank. Those funds were frozen by a citation to discover assets served by Bank of America on Debtor and Chase before Debtor filed for bankruptcy. Bank of America’s service of the citation created a lien on the funds under state law.

The following facts are not disputed. Bank of America obtained a judgment against Debtor in February 2017 for approximately $228,000. In April 2017, Bank of America issued and served a citation to discover assets against Debtor. The Debtor repeatedly failed to comply with the citation and appear for an examination. Bank of America obtained a court order to compel Smiley’s appearance and was finally able to examine her in early September 2017. Meanwhile, Bank of America issued a third party citation to Chase, which was served on August 28, 2017. On September 5, 2017, Bank of America received a response from Chase indicating that it held more than $25,000 in four accounts in which Smiley had an interest. Bank of America immediately asked Chase for copies of Smiley’s bank statements to ascertain the extent of her interest in the accounts and to determine whether transfers were made in violation of the citation served on Smiley in April.

Debtor filed a chapter 13 bankruptcy case on September 12, 2017. Bank of America learned of the bankruptcy filing on September 13, 2017. It promptly contacted Chase to tell it to suspend its efforts to provide copies of bank statements. It also informed the state court of the bankruptcy filing so that the case could be placed on the bankruptcy stay calendar. In early October, Debtor’s counsel called counsel for Bank of America and requested that it “remove it’s freeze” on Debtor’s bank accounts so she could use the funds. Counsel for Bank of America refused to do so and advised Debtor’s counsel that it would be filing a motion to lift the stay. Debtor then filed her motion for sanctions. She argues that the automatic stay requires Bank of America to release the funds in the bank account even though they are subject to a citation lien. She seeks actual and punitive damages for this alleged willful violation of the automatic stay under § 362(k) of the Bankruptcy Code.

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