Creditor’s Attorney Sanctioned with Punitive Damages for Misleading the Court About her Knowledge of Debtor’s Bankruptcy Filing

Creditor’s Attorney Sanctioned with Punitive Damages for Misleading the Court About her Knowledge of Debtor’s Bankruptcy Filing

The Debtor filed a motion for sanctions against her former husband (“Husband”)  alleging that he willfully violated the automatic stay; she sought actual and punitive damages under 11 USC § 362(k).

On November 8, 2016, the day after the Debtor filed her voluntary petition commencing this case, a hearing took place in Massachusetts Family Court on a motion for contempt brought by Husband against the Debtor for violating prior orders of the probate court. Husband had requested, among other things, that the Debtor be ordered to immediately deliver to him a motor vehicle in her possession. Under their divorce agreement incorporated into the probate court’s judgment of divorce, the Debtor was obligated to make monthly lease payments on the vehicle which, although leased by Husband, was in her sole possession. When the Debtor fell behind on her payments, the lease finance company threatened to take action against its lessee, Husband.  This justifiably upset Husband and led to his filing the contempt motion.

Husband’s contempt motion in the probate court had initially been scheduled for hearing on September 22, 2016. At that hearing, the Debtor entered into a stipulation with Husband in which she agreed to refinance the car lease so as to get it out of Husband’s name. The probate court continued the motion to November 8, 2016, to monitor the Debtor’s compliance. The Debtor did not refinance the car lease as she had agreed. Faced with the possible loss of her sole means of transportation and perhaps the wrath of the probate court, the Debtor chose to file her bankruptcy petition the day prior to the continued hearing on Husband’s contempt motion. The probate court hearing went forward nevertheless, which brings us back to the matter at hand.

The emergency hearing before the Court on the Debtor’s motion for sanctions was held in November 17, 2016 . Husband’s attorney prosecuted the  contempt motion in the probate court on November 8, 2016. The lawyer alleged that neither she nor Husband was aware of the bankruptcy filing the day before. The Husband’s lawyer also argued that the automatic stay did not apply to the probate court hearing in any event because the automobile which was the subject of her contempt motion and demand for turnover, was leased, not by the Debtor but by Husband, and thus was not property of the bankruptcy estate.

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