Summary:
In In re Reid, the Bankruptcy Court for the Middle District of North Carolina found that Modern Rent to Own willfully violated the automatic stay through a sustained campaign of post-petition collection calls and texts directed at a Chapter 7 debtor who was proceeding pro se. The factual record was not close: more than 100 voicemail calls and over 50 text messages, continuing after repeated actual notice of the bankruptcy filing, and accompanied by statements that collection would continue regardless. The Court had little difficulty finding a willful violation of § 362(a) and entitlement to relief under § 362(k).
The facts matter. Ms. Reid testified—credibly and unrebutted because Modern Rent to Own couldn't have been bothered to send an attorney to represent it—that the barrage of calls left her voicemail unusable, caused her to miss medical communications, and directly interfered with her ability to obtain childcare work that depends on phone notifications. The Court accepted that these harms were real and caused by the stay violations. Still, because Ms. Reid could not precisely quantify her damages, the Court awarded $1.00 in nominal compensatory damages and $5,000 in punitive damages.
Pro se posture cuts both ways
The Court explicitly acknowledged that Ms. Reid’s pro se status contributed to the difficulty in quantifying actual damages. That acknowledgment is important—but it also highlights a recurring, uncomfortable pattern: damages for stay violations often seem lower when the debtor is represented by counsel, as if courts assume that having a lawyer somehow cushions or mitigates the real-world impact of illegal collection activity. That assumption is hard to square with reality. Harassment is harassment whether or not a debtor has counsel on speed dial, and the automatic stay protects people, not just legal theories.
The Lyle comparison problem
The Court relied heavily on In re Lyle (E.D.N.C.), where $100 per call for 540 illegal calls yielded $54,000 in punitive damages. Yet here—despite evidence of over 150 separate communications (calls plus texts)—the punitive award was capped at $5,000. The Court characterized this as a “moderate” award sufficient for deterrence, but the comparison raises eyebrows. If $100 per call was appropriate in Lyle, why is a fraction of that amount sufficient here, particularly where the conduct persisted after repeated notice and the creditor did not even appear to defend itself?
Statutory damages as a missed benchmark
Bankruptcy courts often say they are not bound by other consumer protection statutes when fashioning § 362(k) remedies. That may be true—but they can still look to those statutes for guidance. At a minimum, statutory damages frameworks provide a reality check for deterrence.
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North Carolina’s UDTPA (N.C.G.S. § 75) allows up to $4,000 per violation in statutory damages.
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The Telephone Consumer Protection Act (TCPA) provides $500 per improper call or text, escalating to $1,500 per violation for knowing or willful offenses, with no overall cap
Under the TCPA alone, 150 willful violations × $1500 = $225,000 in statutory damages—an amount Ms. Reid could still plausibly pursue in a supplemental federal action. Against that backdrop, a $5,000 punitive award for serial, knowing stay violations looks less like deterrence and more like a cost of doing business.
“But that could bankrupt the creditor…”
The predictable response is that larger awards could devastate a small creditor like Modern Rent to Own (or its owner and manager personally). That concern rings hollow in bankruptcy court. Courts routinely grant creditors relief from the automatic stay—with devastating consequences to debtors—for far more innocent conduct, such as missing payments. If bankruptcy courts are comfortable imposing life-altering consequences on consumers for defaults, they should be equally comfortable imposing meaningful consequences on creditors who deliberately ignore federal law. Instead, a $5,001 award is, as Jamie Dimon once explained to Sen. Elizabeth Warren saying "So hit me with a fine. We can afford it" , instead just a minor cost of doing business (illegally).
A reporting obligation worth remembering
Finally, this is exactly the sort of case that should not disappear into the electronic ether. 28 U.S.C. § 159(c)(3) requires clerks to report “cases in which creditors were fined for misconduct and any amount of punitive damages awarded by the court for creditor misconduct.” That obligation is too often overlooked. This decision belongs on that list—not just for transparency, but to reinforce that the automatic stay is not optional and for the possibility (however infinitesimal) that Congress will realize the frequency and scope of illegal behaviors by creditors is much worse than the misdeeds of debtors.
Bottom line: In re Reid gets the law right on liability but undershoots on remedies. If punitive damages are meant to deter, courts should be willing to look beyond internal bankruptcy comparisons and take seriously the statutory damage regimes that Congress and state legislatures have already deemed appropriate for this very kind of conduct.
To read a copy of the transcript, please see:
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