Michael Brian White and Stephanie Jonas White

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
MICHAEL BRIAN WHITE and
STEPHANIE JONAS WHITE,
DEBTORS.
CASE NO. 09-05578-8-JRL
Chapter 7
ORDER
This case is before the court on the debtors’ motion for sanctions against Hendrick
Automative Group d/b/a Hendrick Chevrolet (“Hendrick”). A hearing on this matter took place
in Raleigh, North Carolina on May 25, 2010.
The debtors, Michael and Stephanie White, filed a voluntary petition for relief under
chapter 7 of the Bankruptcy Code on July 6, 2009. On June 22, 2009, the debtors purchased a
2009 Chevrolet Silverado from Hendrick. As part of the purchase transaction, the male debtor
wrote a check to Hendrick in the amount of $3,500.00. The funds were not available in the male
debtor’s account when he wrote the check. However, the male debtor asserts that he had a
$2,500.00 overdraft protection on his account and had instructed Hendrick not to negotiate the
check for 10 days, during which time he would deposit an additional $1000.00 from his
paycheck. Hendrick denies that it ever received such instructions. Hendrick attempted to
SO ORDERED.
SIGNED this 11 day of June, 2010.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
Case 09-05578-8-JRL Doc 37 Filed 06/11/10 Entered 06/11/10 14:31:14 Page 1 of 4

2
immediately negotiate the check which was dishonored by the debtors’ bank on June 25, 2009.
Upon notification of the dishonored check, the male debtor came to Hendrick on June 30, 2009
and delivered a cashier’s check in the amount of $1,000.00. At the same time, the male debtor
delivered to Hendrick another personal check for $2,500.00, which was also dishonored by the
debtors’ bank.
The debtors filed their bankruptcy petition on July 6, 2009. Hendrick received notice of
the filing via fax on July 30, 2009. Although Hendrick was not listed as a creditor in the
debtor’s original schedules, it was added as a creditor and appropriately served on August 5,
2009 with the amendment and the appropriate notices of the filing. On August 20, 2009,
Hendrick reported the felonious $2,500.00 worthless check to Officer C. G. Anderson of the
Cary Police Department, while Officer Anderson was at the Hendrick store premises on other
business. The male debtor was arrested, and required to post bond in the amount of $350.00. He
incurred attorney fees in the amount of $2,500.00 and, as part of the plea agreement, was
required to pay Hendrick $2,500.00 and perform 75 hours of community service he values at
$1,500.00 in lost wages. The debtors contend that they suffered actual damages in the amount of
$6,850.00.
The debtors assert that subsequent to the bankruptcy filing and imposition of the
automatic stay, Hendrick took steps to attempt to collect debts properly listed in the amended
petition by reporting the worthless check to Officer Anderson. The male debtor contends that by
seeking criminal actions against him for the purpose of collecting a debt, Hendrick willfully
violated the provisions of the automatic stay. The debtors seek damages, sanctions and attorney
fees. It is Hendrick’s position that it did not notify Officer Anderson about the check for the
Case 09-05578-8-JRL Doc 37 Filed 06/11/10 Entered 06/11/10 14:31:14 Page 2 of 4

3
purpose of collecting the debt. Hendrick contends that after notifying Officer Anderson, it did
not inquire further about the matter and has in no way indicated intent to recover the funds owed
by the debtors outside of the bankruptcy process.
The automatic stay goes into effect immediately upon the filing of the bankruptcy case
and, pursuant to 11 U.S.C. § 362(a)(6), prohibits all entities from “any act to collect, assess, or
recover a claim against the debtor that arose before the commencement of the case.” Under §
362(k)(1), “an individual injured by any willful violation of a stay provided by this section shall
recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances,
may recover punitive damages.” In order for a conduct to be willful, it has to be done
intentionally and with knowledge of the bankruptcy case.
Bankruptcy proceedings have built-in protections for creditors who are owed monies.
Therefore, creditors must work within the confines of the bankruptcy system if they believe they
have been wronged by the debtor. In re Jesse Negrete and Joyce Negrete, Case No 07-00540-8-
JRL (Bankr. E.D.N.C. August 10, 2009). This court has aptly observed that:
“[O]nce a debtor files a petition for bankruptcy, a disgruntled creditor may not then
approach a governmental prosecutorial entity in order to prompt a criminal action to
recover debt. If the creditor already has complained to authorities by the time a petition is
filed, those authorities may commence or continue a criminal prosecution . . . as they see
fit. But if the debtor files for bankruptcy before a creditor complains to prosecuting
authorities, that complaint . . . may constitute a violation of the automatic stay or
discharge injunction.” Id. (citing In re Byrd, 256 B.R. 246, 252 (Bankr. E.D.N.C. 2000)).
Here, Hendrick was aware of the bankruptcy and noticed as a creditor on July 30, 2009.
Nonetheless, on August 20, 2009, Hendrick decided to report the worthless check to Officer
Anderson. Had Hendrick reported the worthless check at any point prior to the bankruptcy
petition, a different outcome would result. Here, Hendrick reported it with admitted knowledge
Case 09-05578-8-JRL Doc 37 Filed 06/11/10 Entered 06/11/10 14:31:14 Page 3 of 4

4
of the bankruptcy filing. Hendrick’s intent had a dual purpose: to report a crime and hopefully to
get reimbursed. This dual purpose runs afoul of the Bankruptcy Code and sanctions are
appropriate. However, the debtors are not without reproach, as they omitted this claim from
their original petition. Additionally, Hendrick took no further steps after its report to Officer
Anderson. Thus punitive damages are not appropriate. Based on the foregoing, the motion for
sanctions is ALLOWED. The debtors are entitled to compensation for actual damages.
Hendrick is directed to pay a monetary sanction in the amount of $6,850.00.
“END OF DOCUMENT”
Case 09-05578-8-JRL Doc 37 Filed 06/11/10 Entered 06/11/10 14:31:14 Page 4 of 4