2013 Bankr. LEXIS 2662
Bankr. D. Colo.2013Background
- Debtors filed Chapter 7 and were behind on rent/deposits from the outset.
- In Oct 2011 debtors promised not to list Brookside as a creditor to secure a postponement of eviction actions.
- On January 12, 2012 petition filed with Brookside omitted from creditor list; eviction notice served for pre-petition rent.
- Between February 23 and March 6, 2012, debtors amended schedules to include Brookside; negotiations and updated eviction notices occurred around post-petition rent.
- Debtors offered and made payments; March 6, 2012 letter alleging stay violation followed by a stipulation and eviction judgment; judgment vacated March 29, 2012.
- Debtors’ personal property was removed, stored, and later delivered in July 2012; a Notice of Security Deposit Withholding was issued April 24, 2012; deposit and belongings ultimately revested in debtors before discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did landlord violate the stay by attempting to collect post-petition rent and pursuing eviction? | Debtors allege stay violations for pre-petition debt collection and eviction. | Brookside contends actions targeted post-petition rent and did not violate stay. | No willful stay violations for rent collection; eviction actions were addressed but sanctions denied. |
| Did removal and sequestration of the debtors’ possessions violate the stay? | Debtors contend possession removal/travel violated the stay. | Landlord acted to store possessions; lawful until exemptions matured. | Possessions were not estate property after March 7, 2012; no stay violation for continuing storage. |
| Did the April 24, 2012 offset of the security deposit violate the stay? | Offset against debts breached the automatic stay. | Deposit offset was claimed to comply with notice; still argued under stay. | Yes, offset violated the stay; deposit had revested in debtor and remained protected until discharge. |
| Should equitable principles bar sanctions for stay violations? | Equitable considerations may excuse sanctions where debtor conduct contributed to stay issues. | Equitable relief should be narrow and not override stay policy. | Equitable relief denied; debtor conduct contributory but weighed against imposing sanctions; sanctions denied. |
Key Cases Cited
- Calder v. Calder, 907 F.2d 953 (10th Cir. 1990) (equitable considerations may excuse stay violations when debtor contributed to stay plight)
- In re Diviney, 225 B.R. 762 (10th Cir. BAP 1998) (recognition of equitable principles in stay violation cases)
- In re Stoltz, 315 F.3d 80 (2nd Cir. 2002) (citation relied upon for stay concepts and related equitable considerations)