Peggy L. Jones

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION
IN RE:
PEGGY L. JONES
DEBTOR
CASE NO.
06-00380-8-RDD
ORDER ALLOWING MOTION FOR SANCTIONS
The matter before the court is the debtor’s motion for sanctions against Beneficial. A hearing was
held in Fayetteville, North Carolina on June 25, 2007.
The debtor filed a petition for relief pursuant to chapter 13 of the Bankruptcy Code on February
10, 2006. At that time, Beneficial was notified by the debtor’s attorney of the pending bankruptcy. On
February 14, 2006, Beneficial was further served with a notice of the filing by the bankruptcy court. In
December 2006, this court entered an order for sanctions against Beneficial for multiple violations of the
automatic stay. This order was based upon Beneficial’s mailing of several billing statements to the debtor,
as well as numerous phone calls made to the debtor regarding the amounts owed to Beneficial by the
debtor. On February 7, 2007, an order to show cause was entered against Beneficial for its failure to pay
SO ORDERED.
SIGNED this 27 day of June, 2007.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
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the sanctions required by the December 2006 order. After this order was entered, counsel for Beneficial
and counsel for the debtor entered into a negotiated settlement regarding the sanctions, and a settlement
check was received from Beneficial on March 9, 2007.
On April 6, 2007, the debtor received a telephone call from a representative of Beneficialregarding
the debt owed by her to Beneficial. The debtor referred the representative to her attorney. On April 9,
2007, the debtor received a letter from Beneficial, dated April 2, 2007, with regard to the debt owed.
Debtor’s Exhibit B. She also received another letter, which was addressed to her attorney, dated April
9, 2007. Debtor’s Exhibit A. Based upon these continuing violations of the automatic stay, the debtor
seeks additional sanctions against Beneficial.
Counsel for Beneficial argues that the telephone call and the letters were both generated as a result
of the mistake of one employee of Beneficial. Ms. Sheree Wilson received notice of the order dismissing
the show cause order against Beneficial, and mistakenly believed it to be a dismissal of the debtor’s
bankruptcy case. Based upon this belief, Ms. Wilson changed the status of the debtor’s account from
bankruptcy to collection. Counsel for Beneficial argues that this mistake was an honest error, and does
not rise to the level of the willful violation required for the entry of sanctions provided for in 11 U.S.C. §
362. Counsel further indicates that Beneficial has now enacted additional training for its employees with
regard to reviewing orders and confirming the status of cases using PACER. Beneficial presented no
testimony by witnesses at the hearing.
The debtor testified that she now has a feeling that Beneficial will never stop pursuing her for
collection of the debt owed to it. As a result of the continued contact made by Beneficial, the debtor has
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had to increase the frequency of her visits to her counselor and therapist and has been placed on additional
medications for depression and sleep deprivation. She has had to spend an additional $400.00 for
prescription medication.
In the case of In re Armstrong, 96 B.R. 55 (Bankr. E.D.N.C. 1989), the court states:
It has been held that a violation of the automatic stay is willful where the creditor knows
of the debtor’s bankruptcy and intentionally engages in acts later found to violate the stay.
If a creditor is uncertain about the scope of the automatic stay, he takes the risk of being
assessed for damages if he fails to obtain clarification from the bankruptcy court.
(Citations omitted). In other words, willfulness does not refer to the intent of the creditor to violate the
automatic stay, but rather the creditor’s intent to commit the acts which violate the automatic stay, when
the creditor knows of the debtor’s bankruptcy. If the creditor intentionally acts and its actions violate the
automatic stay, then the creditor’s acts are willful. Beneficial intentionally made the phone call to the
debtor. Beneficial intentionally sent the collection letters to the debtor. Beneficial knew of the existence
of the debtor’s bankruptcy and of the automatic stay because Beneficial had been sanctioned previously
in this same case. If anything, because of these previous sanctions, Beneficial should have been more
careful in its reading of the dismissal of the order to show cause, not less careful.
Based on the foregoing, the court finds that Beneficial’s violation of the automatic stay, committed
by making a telephone call to the debtor and sending two letters to the debtor, after having previously been
sanctioned, was willful. The debtor is entitled to recover actual damages in the amount of $400.00. The
court further finds that punitive damages in the amount of $3000.00 should be awarded in this case. The
debtor is entitled to recover attorney fees in the amount of $1500.00 to be paid to Robert Fuller, counsel
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for the debtor. All sanctions are to be paid to the debtor and debtor’s counsel within ten days from the
entry of this order.
SO ORDERED.
END OF DOCUMENT
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