Liability for Violating the Automatic Stay: How Cutting Corners Costs Money
It has become increasingly common for companies to use nonattorneys in attorney roles for the purpose of cutting costs. However, occasionally these “fee-saving” measures actually end up costing a company even more than if they had an attorney do the work in the first place. Nowhere can this be more problematic [or expensive] than in the bankruptcy area, particularly if the company fails to have procedures in place to recognize and react to the automatic stay in routine collection matters.
This is what happened in a recent case decided by the Eleventh Circuit. The court in Parker v. Credit Central affirmed lower court decisions that creditor “Credit Central willfully contravened the automatic stay in reckless disregard of the law and Parker’s rights” and affirmed an award of $10,000 in punitive damages and $30,000 in attorney’s fees.
The Credit Central Case
On Aug. 14, 2012, Credit Central filed a collection action in small claims court for $1,200 against Marion Parker. Credit Central did not use the services of an attorney in connection with the collection action. Nine days later, Parker filed a chapter 13 petition and called Credit Central to advise it of his bankruptcy filing. On Aug. 26, 2012, a notice of the commencement of Parker’s chapter 13 case was mailed to Credit Central. Credit Central admitted to receiving both the phone call and the notice of commencement. Two days after receiving the notice, Credit Central filed a proof of claim in the bankruptcy proceeding.