On April 25, 2019 the District Court for the Southern District of New York reversed a Bankruptcy Court order that found Wells Fargo had violated the automatic stay.
Pursuant to the District Court opinion, Wells Fargo maintains an internal policy known as the Administrative Pledge Policy (the “Policy”). Pursuant to this Policy, if an individual debtor files for bankruptcy and the debtor’s balances on deposit are less than $5,000 in the aggregate, Wells Fargo does not limit the debtor’s access to prepetition account funds; however, if the aggregate amount exceeds $5,000, Wells Fargo places an “administrative pledge” on the accounts, effectively freezing all prepetition funds, and looks solely to the chapter 7 trustee to control payment of account balances that are property of the bankruptcy estate.
The Debtors filed a chapter 7 bankruptcy on March 7, 2014. They had four bank accounts with Wells Fargo with an aggregate amount more than $5,000.00. After filing, Wells Fargo placed the accounts in “bankruptcy status” identifying them as property of the bankruptcy estate controlled by the chapter 7 trustee. This freeze results in an “administrative pledge” to the accounts that permits payment of the balances in the accounts only upon the trustee’s direction. Wells Fargo notified the trustee and Debtors’ counsel of this decision the same day the freeze was placed on the accounts.
The Debtors then suffered an NSF fee of $25.00 stemming from a refused payment from one of their accounts.
The Debtors filed a motion for sanctions for violation of the automatic stay. The Bankruptcy Court agreed and sanctioned Wells Fargo $25.00 in damages, $14,839.50 in attorney’s fees, and costs of $13.68. On January 12, 2015 Wells Fargo filed its notice of appeal.
On appeal, the Debtors were pro se and did not file a response to Wells Fargo’s Appellant’s brief. However, NACBA requested and was granted permission to file an amicus brief. Following NACBA’s submission of its brief, the District Court took the case under advisement.
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