Summary:
Mr. Ennis filed a Chapter 7 bankruptcy, including First Federal as a creditor. While First Federal did activate a bankruptcy block to discontinue past due notifications, its continued to send computer generated monthly statements to Mr. Ennis, listing the balance, accrued interest and amount past due. Mr. Ennis’ counsel did send notices to First Federal regarding the bankruptcy filing and the extent of the automatic stay, but did not describe any specific wrong doing. These notices were sent to First Federal at its street address, rather than its mailing address. First Federal also had difficulties with the U.S. Postal Service delivery to its street address. (A problem that it did not seem to be interested in mitigating itself.) Eventually the case was re-opened, a motion for sanctions was filed, and discovery ensued.
While finding that First Federal had in fact willfully violated the automatic stay and discharge injunction, the court did not find credible that Mr. Ennis had suffered any emotional distress beyond what is normally encountered, as “the bankruptcy process tends to be an unfamiliar and ofter-stressful (sic) endeavor for most people.” The court could not credit Mr. Ennis’s concerns about still potentially owing a debt to First Federal, as his “very capable counsel ... certainly would have explained to him that he would no longer owe First Federal upon his discharge.” Further, the attorney’s fees sought in this case, were limited to the nominal amounts incurred up to the re-opening of the case, largely due to the failure of debtor’s counsel to mitigate damages by:
1. Direct contact with the creditor by telephone;
2. Attempt to determine who generally represented the creditor in the district; or
3. Attempt to write the creditor detailing the specific violations.
Commentary:
This opinion stands squarely in the tradition of North Carolina bankruptcy courts urging both conciliation between parties and collegiality in the bar as prerequisites to litigation. Consumer debtors attorneys should both heed its admonition to try to resolve matters informally first but should also insist that the same obligation to mitigate be placed on creditors and their counsel, who often file Motions for Relief from Stay, Objections to Confirmation and even simple Proofs of Claim seeking attorneys’ fees without first attempting amicable settlements.
For example, given that, except in the most unusual situations, the terms of a consent order for a Motion for Relief are rather well established, it is hard to understand why a Motion for Relief, which in the Eastern District will likely result in nearly $1,000 in fees and costs being assessed to the already struggling debtor, should not be preceded by a offer of a Consent Order absent such fees.
Additionally, it should be hoped that bankruptcy courts, if presented with cases where debtors and debtor’s counsel have attempted to mitigate damages through the described means of contact (and it is worth noting that simply calling a creditor, often through byzantine automated telephone directories and disaffected employees that will not provide full names or direct contact information) will recognize such efforts and set damage and fee awards sufficiently high to cause creditors to at least reflect on such choice, if not actually change to avoid them.
For a copy of the opinion, please see:
Ennis- Duty to Mitigate Stay Discharge Violation
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