459 B.R. 242
Bankr. E.D. Va.2011Background
- Debtor filed a voluntary Chapter 7 petition on October 21, 2010, triggering the automatic stay.
- USAA had a prepetition judgment against the Debtor and obtained a garnishment naming Hampton University as garnishee.
- Debtor’s counsel notified Lynch (counsel for plaintiff) of the bankruptcy via fax on October 21, 2010; no further action occurred for weeks.
- Lynch learned of the stay and later prepared a Dismissal Order but Debtor’s counsel did not endorse it; the order was endorsed and returned by Debtor’s counsel to Lynch.
- Lynch ultimately sent the Dismissal Order to Debtor’s counsel on December 23, 2010, who did not tender it to the Norfolk Circuit Court; the Circuit Court entered the dismissal on January 6, 2011.
- The Court held a hearing and analyzed whether Lynch’s delay constituted a willful stay violation under 11 U.S.C. § 362(k)(1).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether counsel’s failure to dismiss prepetition garnishment after notice of bankruptcy is a per se stay violation | Williams-Nobles argues delay constitutes willful violation. | Lynch acted in good faith relying on older EDVa authority; not willful. | Not a willful violation; denial of contempt. |
| Whether delay in dismissal constitutes a stay violation under 362(k)(1) | Any delay harms the debtor and violates the stay. | Delay due to miscommunication and reasonable reliance on authority; not willful. | Delay not willful; no damages awarded. |
Key Cases Cited
- In re Baum, 15 B.R. 538 (Bankr.E.D.Va.1981) (garnishment dismissal required upon bankruptcy)
- In re Manuel, 212 B.R. 517 (Bankr.E.D.Va.1997) (continuation of garnishment violates stay)
- In re Bailey, 428 B.R. 694 (Bankr.N.D.W.Va.2010) (creditor must act to stop garnishment)
- In re Elder, 12 B.R. 491 (Bankr.M.D.Ga.1981) (creditor cannot pass responsibility to garnishee)
- In re Timbs, 178 B.R. 989 (Bankr.E.D.Tenn.1994) (creditor's attorney bears responsibility to dismiss)
- In re Mims, 209 B.R. 746 (Bankr.M.D.Fla.1997) (sanctions when garnishment refused to be dismissed)
- In re Pulliam, 262 B.R. 539 (Bankr.D.Kan.2001) (sanctions for stubborn stay violation)
- Winters v. George Mason Bank, 94 F.3d 130 (4th Cir.1996) (stay protections and debtor relief objectives)
- In re Terry, 7 B.R. 880 (Bankr.E.D.Va.1980) (automatic stay fundamentals)