In Re See
ORDER RE: DEBTOR’S APPLICATION FOR ORDER FOR RULE TO SHOW CAUSE
This matter came on for hearing on October 15, 2003 on Debtor’s Application for Order for Rule to Show Cause. Attorney Yara El-Farhan Halloush appeared on bеhalf of Debtor Sharlene Marie See. Neither Creditor Blue Grass Savings Bank (“the Bank”) nor its debt collector David Chyma appeared or filed a response to this application. After hearing Debtor’s evidence and argument, the Court took the matter under advisement. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (O).
STATEMENT OF THE CASE
Debtor seeks return of certain funds garnished from her wages and paid over to the Bank. Debtor also requests the Bank be sanctioned for violating the automatic stay, аnd seeks damages from the Bank under 11 U.S.C. § 362(h).
FINDINGS OF FACT
Debtor filed for relief under Chapter 7 of the Bankruptcy Code on May 20, 2003. Judgment was entered in Iowa District Court against Debtor and in favоr of the Bank on February 19, 2003 in the amount of $5,000. The judgment was based on Debtor’s failure to repay a loan from the Bank as required by the contract between the two parties. The Bank subsequently began garnishment of Debtor’s wages in order to satisfy the judgment. The Bank employed Mr. Chyma of Credit/Collection Management to handle the judgment сollection process. Debtor’s wages were garnished from her employer on the following dates and in the following amounts:
May 2, 2003 $121.25
May 9, 2003 $106.46
May 22, 2003 $110.46
May 29, 2008 $108.83
June 5, 2003 $107.89
The $107.89 garnished on June 5 has been refundеd to Debtor by her employer. On June 18, 2003, the Bank, in Iowa District Court, moved to have the garnished funds condemned and paid over to it. This motion was granted the same day, approximately one month after Debtor’s bankruptcy petition was filed.
On July 2, 2003, Debtor’s attorney sent the Bank a letter requesting that the Bank pay Debtor $447, the amount of аll the garnished wages less the amount already
CONCLUSIONS OF LAW FUNDS GARNISHED PRE-PETITION
The relevant portion of Iowa’s general exemption statute states,
A debtor who is a resident of this state may hold exempt from execution the following property: ... In the event of a bankruptcy proceeding, the debtor’s interest in accrued wagеs ... as of the date of filing of the petition in bankruptcy, not to exceed one thousand dollars in the aggregate.
Iowa Code § 627.6(9)(c)(2003).
The question posed is whether a debtor has an interest in garnished wages. Under Iowa law a debtor retains some interest in garnished funds until an order condemning the funds is entered by the Iowa District Court.
In re Yetter,
Debtor had an interest in the garnishеd wages until a valid condemnation order was entered. Further, Debtor properly listed her interest in the garnished wages as of the date of filing as exempt property on the bankruptcy petition. The Bank did not object to the scheduling of the garnished funds as exempt property on Debt- or’s petition. The $227.71 garnished prior to thе filing of the bankruptcy petition and properly scheduled as exempt property must be paid over to Debtor by the Bank.
CREDITOR’S POST-PETITION ACTIONS
The Bank’s filing of the applicatiоn to condemn the garnished funds is a violation of the automatic stay under 11 U.S.C. § 362(a).
Yetter,
DAMAGES FOR VIOLATING THE AUTOMATIC STAY
A debtor injured by the “willful violation” of the automatic stay is entitled to “recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, ... punitive damаges.” 11 U.S.C. § 362(h). “A willful violation of the automatic stay occurs when an entity acts deliberately with knowledge of the bankruptcy petition.”
In re Dencklau,
The Bank was a scheduled creditor in Debtor’s bankruptcy сase, and received notice of the filing. The Bank’s actions were 'willful beyond any doubt since it had knowledge of the bankruptcy. Debtor is entitled under § 362(h) to recovеr her actual damages, which includes lost wages and travel expenses to attend the hearing, and attorney fees incurred to pursue this action, in addition to thе funds previously discussed.
The final issue is whether the Bank should pay punitive damages. The Eighth Circuit has held that “egregious, intentional misconduct on the violator’s part is necessary to support a punitive damages award.”
In re Ketelsen,
The Bank is a business enterprise, well versed in the rights and duties of borrowers and lenders. The Bank employs Mr. Chyma who works exclusively in the debt collection industry. Mr. Chyma’s failure to stop the debt collection procеss upon learning of Debtor’s bankruptcy is willful conduct. Mr. Chyma did respond once to Debtor’s request for reimbursement with a letter, but no further action was taken. The Bank’s and Mr. Chyma’s failure to correct their violation of the Code and failure to appear or respond in this matter has caused delay and expense to Debtor. The Court finds these circumstances warrant the grant of punitive damages against the Bank.
WHEREFORE, Debtor’s Application for Order for Rule to Show Cause against the Bank is GRANTED.
FURTHER, the Court finds that the Bank must reimburse Debtor for the funds taken that were properly claimed as exempt and that were taken in violation of the automatic stay in the amount of $447.
FURTHER, the Court finds that Debtor sustained additional actual damages consisting of lost wages and travel expenses in the amount of $174.16.
FURTHER, the Court finds that Debtor should be awarded punitive damages in the amount of $5,000.
FURTHER, judgment is entered in favor of Debtor Sharlene Marie See and against Blue Grass Savings Bank in the total amount of $6,730.79.
FURTHER, said judgment shall collect interest at the rate of 10% per annum from the date of entry of this judgment.
FURTHER, any Court costs associated with Debtor’s pursuit of these sanctions are assessed to Blue Grass Savings Bank.