Tag: community property

Innocent spouse in bankruptcy fraud and the Bartenwerfer case

Innocent Spouse, Bankruptcy, and Fraud.. oh my – Bartenwerfer

Innocent Spouse, Bankruptcy, and Fraud.. oh my – Bartenwerfer

Can the fraud of one spouse be imputed to an innocent spouse, thereby making the debt nondischargeable to both in a bankruptcy? Meet the Bartenwerfer family.

2023 update: this case is pending before the SCOTUS in 2023.

The Supreme Court Case of Bartenwerfer v. Buckley

The Supreme Court is set to rule on this very issue in 2023. This is an appeal of a bankruptcy case with an innocent spouse whose husband was found liable for prepetition nondisclosure which turned into a bankruptcy court finding of nondischargeable fraud.

The basic facts are that Mr. Bartenwerfer (Debtor) sold a house to Mr. Buckley (Creditor), who then later found a bunch of undisclosed defects on the remodeled home. In fact, Debtor signed a statutory transfer disclosure statement which contained false representations that Creditor relied upon. Creditor sues. After three years at trial, a jury found Debtor liable for, among other things, nondisclosure of the defects. The jury also awarded Creditor, after reduction, about $250,000 in damages.

Debtor then filed Chapter 7 bankruptcy, and to the surprise of nobody, Creditor followed him into the bankruptcy and filed and succeeded with a motion to have the nondisclosure portion of his quarter-million dollar judgment found nondischargable per 11 USC 523(a)(2)(A).

The bankruptcy court then made a specific ruling in favor of Mrs. Bartenwerfer — Debtor’s spouse — was not liable for the debt. This was based on the facts that she didn’t live at the property after the renovations, she didn’t visit it again until Debtor and Creditor met there to sign the disclosure statement. The court also found she never spoke with the laborors, and had an agreement her Debtor husband that Debtor would assume responsibility and make it his full-time job to supervise the renovations. In re Bartenwerfer, 596 BR 675, 685-686 (NDCA, 2019)

Innocent spouse in bankruptcy fraud and the Bartenwerfer case
An innocent spouse should not be liable for the fraud of their spouse if they didn’t know about it

The Split on Standards for Imputed Fraud to a Spouse

SCOTUS is Strang: Fraud imputed without benefit or knowledge

There are a few ways courts have approached this. One approach, the most absolute and the strictest, is that any agency imputes the fraud to others in the partnership.

We start with the Supreme Court case of Strang v. Bradner, 114 US 555 (1885). Here, there was a business partnership involving wool consignment. The SCOTUS determined that one of the partners had committed fraud, and that was not discharged in bankruptcy. Turning then to whether the partner should also be held liable, it ruled that “we are of opinion that his fraud is to be imputed, for the purposes of the action, to all the members of his firm.” Id. at 561.

The Supremes went on: “…if, in the conduct of partnership business, and with reference thereto, one partner makes false or fraudulent misrepresentations of fact to the injury of innocent persons who deal with him as representing the firm, and without notice of any limitations upon his general authority, his partners cannot escape pecuniary responsibility therefor upon the ground that such misrepresentations were made without their knowledge.” Id.

Clearly, the Supreme Court back in 1885 considered the partnership business as one in which conscious decisions are made with regard to financial and pecuniary agency, and “…especially so when, as in the case before us, the partners, who were not themselves guilty of wrong, received and appropriated the fruits of the fraudulent conduct of their associate in business.” Id. While the SCOTUS discussed “fruits of the fraud” and benefits, other courts have ignored this as if it were dicta.

Strang was followed by the Fifth Circuit, when it held “that innocent partners were precluded from discharging debts generated by their partner’s fraud even if they did not benefit monetarily from the fraud.” In re M.M. Winkler & Assocs, 239 F.3d 746, 748 (5th Cir.2001).” The 5th Circuit continued: “we hold that §523(a)(2)(A) prevents an innocent debtor from discharging liability for the fraud of his partners, regardless whether he receives a monetary benefit.” Id. at 751.

There are other interpretations of this, which has led to some Strang bedfellows.

Sixth Circuit: Receipt of Benefits

A different standard involves benefiting from the fraud. Following Strang, and including as a requirement its language of “fruits of the fraudulent conduct” — that is, benefit from the fraud — is the Sixth Circuit. There, the Circuit Court held that “[T]he fraud in Strang was perpetrated within the scope of the partnership’s business, and, as in the case at bar, the innocent partners received the fruits of the fraudulent conduct.” In re Ledford, 970 F.2d 1556, 1561 (6th Cir. 1992).

Again, in Ledford as in Strang, we have a business case where partners made a conscious decision to be bound by each other’s financial gains, losses, and wrongdoing.

Eighth and Ninth’s Huh and Walker: Knew or should have Known

The Ninth Circuit had adopted a standard that “more than a principal/agent relationship is required to establish a fraud exception to discharge. While the principal/debtor need not have participated actively in the fraud for the creditor to obtain an exception to discharge, the creditor must show that the debtor knew, or should have known, of the agent’s fraud. ” Sachan v. Huh (In re Huh), 506 B.R. 257, 271-272 (9th Cir BAP, 2014).

This reasonable standard adopted from a long-established case in the the Eighth Circuit: “If the principal either knew or should have known of the agent’s fraud, the agent’s fraud will be imputed to the debtor-principal.” In re Walker, 726 F.2d 452,454 (8th Cir. 1984).

Back to Bartenwerfer

The Standards Used by Courts in Bartenwerfer

With that review of standards, what happened in Bartenwerfer? Creditor appealed to the Ninth Circuit BAP, who remanded, asking the bankruptcy court to determine if spouse Mrs. Bartenwerfer was liable for the nondisclosure of defects using the “knew or should have known” standard in Walker v. Citizens State Bank, 726 F.2d 452 (8th Cir 1984). There was an evidentiary hearing, and a finding that Mr. Bartenwerfer’s fraud could not be imputed onto Mrs. Bartenwerfer because she did not know of the fraud. In re Bartenwerfer (9th Cir BAP NC-19-1016-TaFB, 2020). Citing Walker, the BAP wrote that the “bankruptcy court did not err in its determination that Mr. Bartenwerfer’s fraud cannot be imputed to Mrs. Bartenwerfer.” Id. at 11.

In the appeal to the Ninth Circuit Court of Appeals, the 9th Circuit abandoned Huh and Walker, and held that the absolute “basic partnership principles” and that the SCOTUS strict agency precedent should make Mrs. Bartenwerfer liable for the nondisclosure of the defects. In re Bartenwerfer (9th Cir, 2021). The Ninth Circuit treated a the unknowing spouse like a business partner, and applied the formal agency standard to her, citing Strang, as well as In re Cecchini, 780 F. 2d 1440 (9th Cir, 1986).

Which puts the case before the Supreme Court, where in late January 2023, it has agreed to review the issue.

Strang should be limited to business agency

Strang is a business case, and it should not be extended to marriages. There is precedent for this balanced approach.

The Eight Circuit in 2001 followed the 11th Circuit in limiting the applicability of strict Strang to only business agency. “We agree with the Eleventh Circuit that Strang should not be extended beyond its basis in agency law to include the much broader sweep of § 20(a) liability.” Owens v. Miller, 276 F.3d 424 (8th Cir. 2001), citing Hoffend, 261 F.3d at 1153. If the spouse knew or should have known, then the Huh and Walker standard of liability would apply. This is the right balance and approach.

It seems to be a stretch to apply partnership agency standards of imputing fraud to a marriage, particularly when there is an innocent spouse who does not meet the “knew or should have known” standard. In a business venture, both partners go into business and willingly realize and take the risk that there will be contracts, statements, and agreements. Both are savvy and assume these risks, gains, and losses.

In a marriage, there is often one spouse much more knowledgeable in various topics, whether it’s keeping the checkbook or running the family business. When spouses say “I do,” while agreeing to love in sickness and health, the spouses are not knowingly agreeing to assume the burden of imputed fraud when their spouse secretly does wrong and commits fraud. Marriage is not a business partnership.

It’s hoped that the Supreme Court in reviewing the issue and appeal from the 9th Circuit follows the logic and common sense of the 9th Circuit BAP, Walker, and Owens, and refrains from creating new obligations in marriages that harm innocent spouses for the fraud of the other.

median income limits

2023 Median Income Limits to Nail Bankruptcy Means Test in Calif

Median Income Limits to Nail the Bankruptcy Means Test: New for 2023

The government just updated the numbers for 2023 median income limits. Using median household income, it again got easier to qualify for bankruptcy Chapter 7, because of another means test adjustment. And while bankruptcy may seem to be “just forms,” make sure you check out my list of 12 crucial tips to do or avoid before filing bankruptcy.

The means test for bankruptcy decides who qualifies for Chapter 7 bankruptcy eligibility. The first step of this process is comparing your median household income against the California median income limits set by the Department Of Justice guidelines to see if you earn less than bankruptcy median income limits.

Again, this comparison against the median income is merely the first step, and does not absolutely determine your eligibility for Chapter 7 or not.

Nov 2022 Update: The numbers for the means test adjusted November 1, 2022, and will be used for the first part of 2023.

Because of the above statement, these will be the first 2023 median income limits.

The means test limits adjusts over time. So, someone may not qualify according to the bankruptcy means test in one month but after the changes they do, or vice-verse. The last updates were in November 2022 . Below are the November 2022 bankruptcy median income figures to determine who can file Chapter 7 bankruptcy.

Means Test: 2023 Median Income Adjustments

2021 median income limits
2023 median income numbers are much higher than in years past

Every now and then, the government updates the bankruptcy median income limits. They last did it in Nov 2022. Good news: the California 2023 median income numbers are now even higher, increasing household income for bankruptcy means test qualifying. This means that more people could qualify for Chapter 7 bankruptcy using the California median income numbers below.

2023 Median Income for California Households

Because the California median income changes maybe once or twice a year, these recent changes last 2022 will be the first numbers used for 2023 median income. You’ll see below there’s talk about household size. Notice also that larger families also get a break, as the amount for each additional member after 4 increases another $9,900. This is helpful for households of five people or more.

What is Median Household Income: Roommates and Spouses

When reviewing median household income, we start splitting hairs, since not every home is a traditional household. So, things start getting kind of cloudy on what is or isn’t a household. It isn’t always clear who counts in a household.

Note that if you’re married in California, there’s a community property presumption that your spouse’s income is yours also. So add that, and them, to your household figures. Yes, you can file bankruptcy without your spouse. However, their income, assets, debts, and everything else of theirs still comes into your bankruptcy. Why? California is a community property state. Read more for a deeper dive in my article about spouses and filing bankruptcy.

There may be a difference if you have a roommate who pays rent. What if you’re married? Separated? Or have kids but they’re adults. Do you live with your significant other, who has their own finances? Would the answer be different if you had kids together, but weren’t married? Maybe they’d all be considered by the government to be in your household. Or, maybe they’re not.

You can see this is isn’t as simple as it may at first seem. Contact me and set up a Zoom to talk about it.

But below are the California median income limits for the various household sizes.

California household size and California median income for Bankruptcy
  • 1-person household: $69,660
  • 2-person household: $86,271
  • 3-person household: $97,021
  • 4-person household: $113,615
  • Each additional person: $9,900

These are the California median income numbers effective November 1, 2022. If it’s 2023 or you’re looking for the median household income for a different state, please review the DOJ link above.

Read Our Means Test Guide.

California Means Test Calculator for Chapter 7

Many of you have asked about a Means Test Calculator for Chapter 7. So, I put together the following Chapter 7 means test calculator. For other states, there many be others elsewhere on the internet, this won’t apply. This means test calculator for Chapter 7 bankruptcy is just for California.

Also, this is not intended to give advice or definitively say you qualify for Chapter 7 or not. The actual means test is many pages long, and it’s possible to qualify if your income is over the median. Similarly, it’s also possible to be ineligible for Chapter 7 even though your household income is under the median income. Reducing it to one box is like a cheap parlor game, and you should kind of think of this that way.

But notice how, after you input your income, how changing the household size affects the bottom line. As bankruptcy attorneys, this is something we have to be very mindful about and argue for our clients: the appropriate household size based on the unique circumstances of our clients.

With that being said, here’s my very crude 2022-2023 Means Test Calculator for Chapter 7 for California, which you should take with a massive grain of salt:

Wait! Can you file bankruptcy if your household income is over the median?

If you’re over the bankruptcy median, there’s still hope

Yes. The means test and 2023 median income isn’t the “end all be all.” The above/below median part is just a starting point. A person can still file Chapter 7 bankruptcy, in some cases, even if they earn more than the median income. The bankruptcy means test would just need to be filled out completely. It’s still possible to qualify.

Over the years, this Los Angeles bankruptcy attorney has helped people who earn over the California median income limits still qualify for Chapter 7. In one case, we even helped a family whose annual income was almost double the median household income. They were earning around $150,000 a year, and we helped them get a Chapter 7 discharge (your mileage may vary). However, even if someone isn’t eligible, debt consolidation is still a solution in Chapter 13 bankruptcy.

Being Under the Bankruptcy Median Income Doesn’t Guarantee Success

On the other hand, just because someone is earning less than the California median income, it’s possible that they’re not eligible for Chapter 7 bankruptcy. Bankruptcy is all about whether someone can afford to repay their debt or not, and the means test is just one factor.

Note: the median income numbers are not to be confused with the Los Angeles County median home price figures, and each has a different place in evaluating Chapter 7.

Finally, as the economy is always changing, so does California median household income. We don’t know the next time changes to the median income limits will happen again. So, be sure to check before relying on these California median income limits in the future.

Contact Us and Let’s Find out If you Qualify



    wrongful death California community property

    Wrongful Death Proceeds and Community Property in California

    Wrongful Death Proceeds and Community Property in California

    Someone recently asked, “Are wrongful death recovery proceeds community property in California?” The field of bankruptcy crosses over with so many other areas of law. The question stands at the intersection of bankruptcy law, California community property law, and tort law. But the answer to this wrongful death question is critical for bankruptcy lawyers and someone filing bankruptcy in California.

    Why it matters if wrongful death claims are community property

    This might seem like a tiny point, but it’s really important whether a wrongful death claim or funds are community property or not. There are lots of twists and turns as to whether it affects the other spouse when only one spouse files bankruptcy.

    If the money or right to bring a cause of action belongs to only one spouse and not to both, then the other spouse has no ownership interest in the claim, or the cash. Or put more simply: if the money or right to get the money belongs to one spouse as separate property, it doesn’t belong to the other.

    With that, if the other spouse files bankruptcy and the claim doesn’t belong to them, then the trustee can’t get to it. If it does belong to them as marital community property, the trustee in a Chapter 7 bankruptcy can take it and repay debts with it. Therefore, it’s crucial to know if it belongs to one spouse, or both.

    Yikes. I don’t want the trustee to take my (spouse’s) claim or money.

    Exactly. Chapter 7 bankruptcy is called liquidation bankruptcy. This means someone can take your stuff. Many people think, “I don’t have anything.” But there are assets we may have that are more intangible, but are still valuable.

    One example of an asset that is intangible would be where someone owes you money. Another would be intellectual property. Yet another would be the right to sue someone. And even more removed, the right of a spouse to sue someone, even if the lawsuit hasn’t been filed yet. Yes, that’s an asset, and could be subject to liquidation in a Chapter 7 bankruptcy.

    This is why is why we need to filter a wrongful death claim through the grid of the California community property presumption, and California courts case law that interpret it and how it applies to different kinds of intangible assets over the years.

    A look at the law: the statutes and case law

    Where does the right to bring a wrongful death claim in Calif come from?

    First, a wrongful death — that is, the right to sue for the loss of a loved one — is defined by statute in California law. Civil Procedure Code 377.60 defines the cause of action for wrongful death. It then goes on to say who can bring the cause of action or lawsuit. It includes some obvious relationships like children and surviving spouse. But the statute was recently broadened to include domestic partners.

    The California Community Property Presumption

    The California community property general presumption from the California Family Code 760 is:

    All property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.

    That’s pretty broad. All property. Personal or real. Anywhere. During the marriage. It covers a lot of ground, and doesn’t except a whole lot.

    So, if a married person acquires money from wrongful death of a relative, that money sounds like property. When you consider a claim for wrongful death, that sure sounds like a property right, too. Maybe the courts have held otherwise because the loss of a loved one is so personal to the one spouse and possibly not as personal to the other. Let’s take a look.

    Wrongful Death California Community Property Court Cases

    Starting with Fuentes v Tucker, 31 Cal.2d 1 (Cal Sup Ct, 1947), the California Supreme Court has long held wrongful death recovery proceeds are community property. Later, the California Supreme Court affirmed the rule in Flores v Brown, 39 Cal.2d 622 (Cal Sup Ct, 1952).

    The Ninth Circuit Court of Appeals explained it even more clearly. The Court stated, “There is a statutory presumption that property acquired by the spouses during marriage is community property. The presumption is a strong one, which the California Supreme Court has characterized as fundamental to the community property system.”

    It continued: “It extends to every conceivable type of property, including insurance policies and their proceeds, a cause of action for the wrongful death of or injury to a minor child; a cause of action for injury to either spouse; a law practice; the interest of a spouse in a partnership; good will of a business; borrowed money; and leasehold interests. Why not to a retained equitable interest in a trust?” (emphasis added, cites omitted). Katz v US, 382 F.2d 723, 728 (9th Cir, 1967).

    Given the community property presumption, California Supreme Court case law, and Ninth Circuit Appellate Court rulings, if one spouse files bankruptcy in a community property state, the wrongful death claim of the other spouse would not be separate property. As such, it would have to be disclosed in the bankruptcy, and the money it brings possibly subject to being taken for liquidation by the trustee.

    As always, discuss your potential bankruptcy case with a skilled and experienced bankruptcy attorney before filing. While your brother’s wife’s hair stylist’s gardener didn’t lose anything when they filed bankruptcy, you might lose stuff in your case. Each situation is different, and with full disclosure and planning, we can find a solution that fits you.

    Can one person file bankruptcy separately

    One Spouse Filing Bankruptcy: Everything You Need to Know

    One Spouse Filing Bankruptcy

    All you need to know about one spouse filing bankruptcy individually or separately

    Can one spouse file bankruptcy without the other?

    Can one spouse file bankruptcy without the other? In consultations, that’s one question I get asked a lot. When we’re married in California, everything is presumed to be joined and shared. So, can a married person claim a bankruptcy? The answer is, “Yes.” Even though someone is married, they have every right to file bankruptcy without the other spouse. They have their own Social Security number and their own credit history. But just because you can do something doesn’t mean you should.

    I’m a bankruptcy attorney practicing in Los Angeles County in California, which is a community property state. All of the information here is specific to California. If you are in a different state, even if it’s community property, this information may not apply, and you should find a bankruptcy lawyer near you. Consult with your bankruptcy lawyer or if you’re in the greater Los Angeles county area, contact me for a consultation.

    If I file bankruptcy individually without my spouse, do I include their finances?

    Yes, in California, a community property state. A debtor needs to disclose all of their assets, and those of the community. 11 USC 541(a)(2). When we get married and say “I do” here, there is a general presumption that every asset or dollar acquired by either person is community property and belongs to both. Calif Family Code 760.

    So regardless of whose name is on the paycheck, bank account, or monster truck, the general marital community property presumption says that if it was acquired during the marriage, it belongs to you both (even a personal injury or wrongful death claim). And when one spouse files bankruptcy, he or she must list the income, stuff, and financial data of the other spouse. For this reason, this factor is no advantage for only one to file, as all the info comes in either way.

    Do I have to list the debts of my spouse if I file bankruptcy separately?

    Family Code Section 910 says, “…the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.” California FC Section 914(a): “..a married person is personally liable for the following debts incurred by the person’s spouse during marriage: A debt incurred for necessaries of life of the person’s spouse before the date of separation of the spouses.”

    Given that, if you are liable for a debt, it is your debt. The bankruptcy petition tells you to list all your debts. Including those of your husband or wife. The bankruptcy trustee will ask if the papers list all of your debts. You must list all debts you are liable for, and that would include those of your spouse in California. Ask your bankruptcy attorney for more on your specific situation.

    If my spouse files bankruptcy, will it affect me?

    “Will filing Chapter 7 bankruptcy affect my spouse?” This question understandably comes up a lot. Affect is such a broad word. It’s almost certain that the bankruptcy will affect the spouse, though how varies from case to case. It may affect the spouse if it’s a Chapter 13 and the community income — that is both pay checks — are used to fund the debt consolidation. It might affect the spouse emotionally.

    Embed from Getty Images

    It could affect the spouse that their debts should be included in the bankruptcy even though the spouse isn’t filing, and affect the credit of the spouse, and the accounts are closed even though they’re being paid on time.

    If you file bankruptcy and your spouse doesn’t, I won’t need their Social Security number or their signature on anything. While I’m happy to meet them, if they truly don’t want to be involved, they need not attend any consultations or court hearings. However, as their financial information is included because of the community property presumption, it will likely affect the spouse in some way.

    Is there a benefit to me if my spouse files bankruptcy and I don’t?

    There are pros and cons to weigh and assess when trying to decide if only one or both spouses should file. There are benefits. Yes, because one spouse can file bankruptcy for both, that’s a benefit. If your spouse files bankruptcy and you don’t, there is one obvious benefit to you: you don’t have a bankruptcy on your credit report. Their bankruptcy should be eliminating your eligible debts also as nonfiling spouse, and the effect is to discharge the debts of both spouses, husband and wife, even though only one person filed. It can be a two-for-the-price-of-one transaction.

    Will filing bankruptcy hurt the credit of the nonfiling spouse?

    Yes. While the married person not filing (fancy term: non-filing spouse) won’t have a bankruptcy on their credit report, their debts should be in the bankruptcy. And when debts are in a bankruptcy, the accounts are typically closed, and reported negatively to Experian, Trans Union and Equifax credit reports. Not “bankruptcy” bad, but still, it should result in derogatory marks on their credit report since the accounts are no longer paid “as agreed.”

    My spouse is disabled, unavailable, or isn’t capable of testifying. Can I sign or testify for my spouse in my bankruptcy?

    Not without something more. Whoever files bankruptcy has to testify as to the truthfulness of the papers. This is done in two ways: one in signing the papers under penalty of perjury, and a second time at the 341(a) meeting of creditors. If your spouse is physically not available, or mentally or cognitively unable to testify, you cannot testify for them, without some additional permission and evidence.

    Can I use a power of attorney to file bankruptcy for someone else?

    The ability to use a power of attorney for a bankruptcy can vary by jurisdiction and is subject to local rules and practice. For example, some courts allow Power of Attorney. United States v Spurlin, 664 F. 3d 954, 959 (5th Cir. 2011), but see also locally here In re Foster, 2012 WL 6554718 (9th Cir. BAP 2012), which says a POA cannot be used in lieu of signature on a pro se complaint as it is construed as practicing law without a license.

    There’s a possible solution where you get court permission to represent your spouse or someone else. In the Central District of California, this is called a “next friend.” FRBP 1004.1 says a bankruptcy court will recognize a personal representative appointed by another court or the bankruptcy court has authority to appoint a next friend. The standard is that petitioner is unable to litigate his own cause due to mental incapacity and the next friend must have significant relationship with and is truly dedicated to the best interests of the petitioner. Coal. of Clergy, Lawyers, & Professors v Bush, 310 F. 3d 1153 (9th Cir. 2002). There are various types of evidence that may be used to show incapacity. AT&T Mobility v Yeager, 2015 WL 6951291, at 5-6 (E.D. Cal. 2015). This will incur extra work and legal fees, and may not always be necessary.

    If one spouse files bankruptcy, does the other spouse get bankruptcy protection?

    As usual in law… it depends. Chapter 13 bankruptcy is special in that it has something called a co-debtor stay of Section 1301. Both spouses are liable on the debts of the marriage, regardless who who incurred it or manages the finances. Family Code 910. So, both spouses are typically liable for all debts. This means that if you file bankruptcy and your spouse doesn’t, that they’re still protected by the codebtor stay if only one of you files Chapter 13.

    Great, but is there bankruptcy protection if only one spouse files Chapter 7?

    Yes, but not for the nonfiling spouse. Chapter 7 bankruptcy only protects the person or people who filed. And spouses in California, while they are liable on debts incurred during the marriage, are not protected by the automatic stay if they don’t sign the petition and schedules and file bankruptcy. However, once the filing spouse gets a discharge, their property cannot be collected against or it’s a discharge violation.

    So, most creditors don’t collect against the nonfiling spouse, since their assets are the same assets as the person who filed and got the discharge. But beware: Family Code 914 says that the separate property of the nonfiling spouse can be collected on, if they have any (most don’t).

    In most Chapter 7 cases, the creditors don’t collect against the other spouse where one files, but are allowed to, even give them a lawsuit. They just can’t use the judgment from a lawsuit to touch community property assets. As that usually is everything, most collectors don’t bother. But they can.

    As you weigh pros and cons, what is the benefit of certainty in Chapter 7 of both parties being absolutely protected from creditor calls and collections worth? If it’s a lot, is it “bankruptcy on your credit report” a lot? Talk with your bankruptcy attorney. There may be other variables in your unique circumstances.

    Can a lien be placed on my house for my spouse’s debts?

    Generally, yes. Because of the Calif Family Code sections above, both spouses (and their assets) are liable for the debts of the other in a marriage. So, if Spouse A got a big credit card debt, there could be a credit card lawsuit resulting in judgment. A judgment lien can then be attached against the asset which Spouse B also owns (typically community property acquired during the marriage in Calif). Filing bankruptcy and getting the automatic stay would stop the lawsuit, and protect that community asset. 11 USC 541(a)(2)(B).

    Can they garnish my paycheck for my spouse’s debts?

    Again, yes. See above. Both spouses — and their community assets — are liable for debts incurred during the marriage under the California Family Code. A paycheck belongs to both spouses, regardless of whose name is on it. There is also the issue if one innocent spouse can be liable for the fraud of the other. So the general answer is, yes, they can garnish your paycheck for the debts of your spouse, and vice verse.

    Summing up

    The intersection of bankruptcy law and community property confuses many people, including attorneys in California. There is not always one best answer to the question, “is it better for us both to file bankruptcy jointly together, or just one spouse separately.” Is it possible to file individually? Yes. What’s best for you and your unique circumstances? Contact me or set up a free Zoom consultation with the link at the top of this page and let’s go over it together. Thanks for reading.

    Automatic stay and bankruptcy protection

    All About the Automatic Stay, the Ultimate Bankruptcy Protection

    All About the Automatic Stay, the Ultimate Bankruptcy Protection

    What is the Automatic Stay definition or meaning?

    Automatic stay is the bankruptcy protection when a new petition is filed with the court. It protects against starting or continuing any debt collection. It’s a powerful provision, and stops all collection activity, maintaining the status quo on the day the bankruptcy papers are filed. Failure to respect the bankruptcy protection can lead to sanctions against the collecting creditor.

    The Automatic Stay definition from the text of Section 362(a)

    The official definition of the bankruptcy automatic stay is in 11 USC 362. Section 362(a) says:

    “…a petition filed under section 301, 302, or 303 of this title… operates as a stay, applicable to all entities of:

    • the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
    • the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
    • any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate…”

    The section goes on, but the quote above is where most of the action in bankruptcy protection comes from.

    Interpreting the automatic stay meaning in simple terms

    Let’s break down what the meaning of the automatic stay is in plain English. Section 362 says that the mere filing of a what? A petition that’s either voluntary, involuntary, or joint (301-303). That pretty much covers most bankruptcy filings. Then what? It stops (stays) the start or continuing most every collection, including enforcing a judgment or trying to take anything from you.

    Bankruptcy protection automatic stay is like a dome over a city
    The bankruptcy protection of the automatic stay is like a magical dome or enchanted shield over you & your stuff

    That’s really broad, and covers almost anything you can think of. It’s like a protective shield around you, your things, and your life against all your debts doing anything to you, the person who filed bankruptcy. Or, to use another simile, the automatic stay is like a dome over a city, where the sun only shines and the birds sing, but outside the shield it’s stormy and dangerous.

    There are a few limits to it, which I explain below.

    When does the Automatic Stay begin?

    The automatic stay is tremendous in that it begins the second the bankruptcy is filed. Why? It’s automatic. File a bankruptcy case, and boom, you’re safe. The fact that the bankruptcy protection starts the moment you file bankruptcy is extraordinary, in a sense.

    “It is elementary that the automatic stay comes into existence automatically and immediately upon the filing of a petition in bankruptcy.” Webb Mtn, 414 B.R.308 (Bankr Ct, Tenn, 2009).

    Normally, in law, if you want something to stop, you have to request that separately. Think of a temporary restraining order. That requires work, time, a justification, and approval. But bankruptcy protection, because it’s automatic, that is, no additional papers need to be filed to get it to kick in, it’s one of the rare exceptions in law.

    You get all the benefits of safety, protection, and peace of mind at the beginning of this legal process. Your creditors have to file lawsuits, wait months or years, get the judgment, and then try to execute on the judgment to take action against you and your stuff. You merely have to begin the bankruptcy legal case before they can finish theirs against you. This is a huge time advantage for the debtor filing bankruptcy.

    How long does the Automatic Stay last?

    The automatic stay starts when you file bankruptcy, and typically lasts for the duration of the case.

    What can end the bankruptcy protection?

    There are a few things that can end the automatic stay:

    • Discharge: When a normal case ends successfully, the debtor gets a bankruptcy discharge and the case is usually closed soon after that. When the discharge is entered, the stay is over.
    • Dismissal: If a bankruptcy case ends unsuccessfully, the automatic stay is over also. The magic dome of sunshine disappears, and the storm clouds come right back. For that reason, dismissal is usually bad.
    • Motion for Relief of the Automatic Stay (MRS or RFS): Creditors have rights also, and if the stay is hurting them unfairly, they can make it go away. Repeat after me: “There is no free car or free house in bankruptcy.” If you stop paying for the house, the mortgage can get through the automatic stay and take your house. Or put differently, if there is a house or car or something you’re financing and you want to keep it, stay current with the payments.

    Wait, back up. After bankruptcy discharge, the stay ends and creditors can collect against me?

    Yes, and no. It’s true that the automatic stay ends when the case concludes with a discharge. The bankruptcy discharge triggers a few legally significant events. First, the discharged debts are no longer legally your obligations. Second, if you had a bankruptcy attorney help you, their representation, per contract, is likely ended. They completed their task and are no longer your lawyer. Third, the automatic stay is also ended, as there is no more active or open bankruptcy case.

    However, the good news is there is something powerful replacing the terminated automatic stay. This new protection is the Order of Discharge.

    Section 524(a) says that a discharge in bankruptcy:

    operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived

    The discharge court order says your debts are gone, and any attempt to collect a discharged debt is a violation. It’s not a violation of the automatic stay, but instead, a violation of a court order. You can and should inform the creditor of this, and if they don’t back off, reopen the bankruptcy and seek sanctions for a discharge violation.

    Violation of the Automatic Stay

    Definition of an Automatic Stay Violation

    A violation of the automatic stay is when a creditor willfully collects after they knew of the bankruptcy protection. The creditor has to have known of the bankruptcy and the automatic stay, or else they can claim as a defense that they had no notice. For this reason, it’s important to document notice of the automatic stay. When the collection company claims they didn’t know of the bankruptcy — and they will — you’ll need to have ample and abundant evidence that they did know, and that they didn’t care and collected against you anyway.

    What if the Creditor doesn’t have Intent to Violate the Automatic Stay?

    Creditor, after being caught with its hand in the cookie jar, may claim that golly, it didn’t intend to violate the automatic stay. The Ninth Circuit Court of Appeals has said, too bad, you intended to do the act. Intent to violate the automatic stay isn’t a requirement. Intent to do the act that violated the stay is all that’s needed. In re Pinkstaff, 974 F.2d 113 (9th Cir, 1992), quoting In re Bloom, 875 F.2d 224, 227 (9th Cir, 1989), In re Pace, 67 F.3d 187 (9th Cir, 1995).

    Examples of Automatic Stay Violations

    Filing a Lawsuit

    One example of violating the automatic stay is where you file bankruptcy, serve the creditor notice of the automatic stay, and maybe even a letter for good measure. Then, three months later, the creditor files a lawsuit against the debtor.

    The lawsuit is the commencement of a judicial proceeding against the debtor that could have been commenced before the commencement of the case or to recover a claim against the debtor that arose before the commencement of the case under this title. Slamdunk violation of the bankruptcy protection.

    Starting a Wage Garnishment

    Another example of an automatic stay violation is where the creditor has already sued the debtor and won in court. Now, armed with a judgment, they’re closing in on collecting. The debtor files bankruptcy, and provides notice of the automatic stay to the debt collector. Next, the collection agent contacts debtor’s employer and starts garnishing the wages.

    In this case, the wage garnishment is an enforcement, against the debtor and against property of the estate (the paycheck), of a judgment obtained before the commencement of the case. Again, another obvious and textbook violation of the automatic stay.

    Foreclosing on a home

    Finally, let’s say the debtor has fallen behind on his or her mortgage. The home loan company is getting cranky, and finally files a Notice of Default and Notice of Sale. Next thing you know, there’s a scheduled foreclosure sale. Debtor then files a Chapter 13 bankruptcy to repay the mortgage arrearages, and provides notice of the automatic stay to the lender. Mortgage company goes ahead with the foreclosure sale, and someone buys the house.

    The home foreclosure is an act to obtain possession of property of the estate (the house) or to exercise control over property of the estate. Straight violation of Section 362 of the Bankruptcy Code. Check and mate, house lender. Automatic stay violation.

    Effect of the Automatic Stay on Acts that Violate it

    In that last example, the home has already been sold to someone else at a foreclosure sale. But it was the result of a stay violation. What is the effect of the sale?

    In California, stay violations are void. The Ninth Circuit Court of Appeals has said that “actions taken in violation of the bankruptcy stay are void.” In Re Gruntz, 202 F.3d 1074, 1081-82 (9th Cir, 2000). Not voidable, void. In re Schwartz, 954 F.2d 569 at 571 (9th Cir, 1992). No action is required by debtor to undo the act. Id.

    The law imposes an affirmative duty on creditors to remedy stay violations by restoring the status quo, and also to establish administrative safeguards to prevent stay violations from occurring in the first instance. In re Dyer, 322 F.3d 1178, 1192 (9th Cir. 2003).

    What if the Stay Violation happens Before Notice is Received

    Knowledge of bankruptcy sufficient for stay; notice doesn’t have to be official

    There is no requirement that a creditor be given an official Court-issued notice or form regarding the bankruptcy case. “[A] party with knowledge of bankruptcy proceedings is charged with knowledge of the automatic stay.” In re Dyer, 322 F.3d 1178, 1191 (9th Cir. 2003).

    Seizing the property doesn’t make it yours

    Now that we have established stay violations are void, what if creditor didn’t know when they violated it? Courts have clearly answered: Petition date controls, not notice.

    The U.S. Supreme Court has ruled that property seized prepetition to collect a debt doesn’t transfer ownership, and it must be returned, pursuant to Section 542(a), even if seized by the IRS. United States v Whiting Pools, Inc, 462 U.S. 198 (Sup Ct 1983).

    Even property taken by the mighty IRS before filing must be returned. With that backdrop, let’s look at cases where property is wrongfully taken after filing, but before creditor had notice of the filing.

    Keeping property seized after filing but before notice is a stay violation

    In the Ninth Circuit, the Bankruptcy Appellate Panel ruled that retention of repossessed car after receiving notice of stay is a willful violation of the automatic stay. “[R]epossession of the debtors’ automobile, while initially inadvertent, became a willful violation of the automatic stay when appellees failed to take any reasonable steps to remedy their violation upon learning of the debtors’ bankruptcy.” In re Abrams, 127 B.R. 239 (B.A.P. 9th Cir, 1991).

    The Ninth Circuit also has held that the knowing retention of estate property violates § 362(a)(3). In re Del Mission Ltd., 98 F.3d 1147, 1151 (9th Cir.1996)(citing Abrams). The appellate court rejected the argument that creditor had no obligation to turn over the property until specifically requested. Id. at 1152.

    “When a creditor lacks notice of a debtor’s bankruptcy, acts in violation of the stay may be inadvertent; however, such acts become willful stay violations when the creditor learns of the debtor’s bankruptcy but fails to take reasonable steps to remedy the violation.” In re Calloway, No. 08-18561SSC, 2009 WL 1564207, (Bankr. D. AZ. 2009) (citing Abrams)

    Other courts outside the Ninth Circuit agree

    Other bankruptcy courts have ruled that even if the creditor didn’t have knowledge, it must take steps to void the violation or face damages. Just to pick one: “Despite having this knowledge, Hunt deliberately refused to cooperate in voiding the sale and reconveying the Trenton property to the Debtor at any time after this date.

    Clearly, these actions were willful and constitute a violation of the automatic stay for which the imposition of damages is appropriate under § 362(k).” In re Tyson, 450 B.R. 754 (Bankr Ct, Tenn, 2011), where buyer of home sold at foreclosure had no notice of automatic stay at time of foreclosure sale, failed to return home, and violated stay and paid damages.

    Wrongful repo cases: repossession after filing without notice violates stay

    A wrongful repo happened after a case was filed but before the repo company had notice. What it did next is what matters: “Rather than comply with its affirmative duty to remedy its stay violation and restore the status quo, Arizona Fleet chose to remain non-responsive, took no steps to confirm or inquire as to the pendency of this bankruptcy case, filed nothing with this Court requesting any form of stay relief, sent the Debtor a notice that it intended to sell the Vehicle, wrongfully continued to maintain possession of the Vehicle, and, without merit, continues to maintain that it was incumbent upon the Debtor to retrieve his wrongfully repossessed Vehicle.” In re Altamirano, Case No. 4:20-bk-11836-BMW (Bankr Ct, AZ, 2022).

    In re Carrigg, 216 B.R. 303 (B.A.P. 1st Cir, 1998), where the repo happened after the bankruptcy was filed without the creditor knowing about it, but creditor failed to return repossessed vehicle after notice of case. The creditor was sanctioned with a willful violation of stay, even though creditor had no had notice of case when vehicle was repossessed.

    Chicago v Fulton, and the Automatic Stay

    What 362 Giveth, Fulton Taketh Away

    It used to be that if someone took something to collect a debt, filing bankruptcy created an obligation for them to return it. All that changed in 2021 when a case percolated up through the courts. The City of Chicago makes quite a pretty penny on impounding vehicles. One person lost their car, filed bankruptcy, and asked for the car back. Chicago didn’t budge. Automatic stay violation? In many places, including here in California and the Ninth Circuit, until now, yes. The Sup Court read the statute, and limited the scope and power of the automatic stay.

    The car repossession taken before filing

    The above repo cases involve a car taken after the case was filed. However, if the car was taken before the case was filed, from now on, it doesn’t have to be returned upon as a possible violation of the automatic stay with notice of the bankruptcy. Chicago v Fulton (In re Fulton), 141 S Ct. 585 (2021).

    In Fulton, the Court said that mere retention, to exercise control, of the property taken before filing (prepetition), without some act that would disturb the status quo, is not a violation of the automatic stay. This means that retention of the car (in this case) isn’t a stay violation, and that something else has to be done to get it back. The Court suggests that Section 542 (turnover) is invoked for an adversary proceeding for turnover of the property. The problem with that is that can take months to resolve. Justice Sotomayor, in a concurrence focusing on simple motions instead, writes that “bankruptcy courts may find it prudent to expedite proceedings or order preliminary relief requiring temporary turnover.” Fulton at 594.

    Not just cars: other seized property falls under Fulton

    When the Supreme Court first decided the case in early 2021, there was the thought (hope?) that maybe Fulton was limited to cars seized by tow yards. That it would be a limited, narrow exception which wouldn’t really impact us here with Los Angeles bankruptcy cases in California and the Ninth Circuit. As Fulton is applied by courts, that’s turning out to not be the case.

    Bank Levy of Accounts and Fulton

    Later in 2021, we saw a court extend it to bank accounts. In Pennsylvania, a lender sued a debtor, won a judgment, and filed a pre-petition attachment lien on bank accounts of the debtor. Debtor filed bankruptcy and then demanded creditor withdraw the attachment as a violation of the stay. A key difference is that, unlike Fulton, creditor was not in possession of property of the estate. No matter. The court said that Fulton requires an act that disrupts the status quo to find a stay violation when it wrote, “the Court finds that Defendants’ refusal to withdraw the valid state court pre-petition attachment of the Penn East Accounts does not violate §362(a)(3). Defendants admittedly took no post-petition affirmative action as to the garnished accounts.” In re Margavitch, 5:19-05353 MJC (Bankr Ct, MD 2021).

    The Ninth Circuit BAP followed Margavitch when it had a bank levy case of its own. The facts were similar: a prepetition lawsuit, and a writ of garnishment on three bank accounts. Later, debtor filed bankruptcy and demanded the creditor instruct the bank to release the funds. After a refusal, debtor claimed it was a violation of the stay. The BAP found that the city’s inaction that merely maintains the status quo does not violate the automatic stay. In re Stuart, 632 BR 531 (9th Cir BAP, 2021).

    The BAP made the point again in 2022 when it said that a lien that existed on petition date where an order granted postpetition about summary judgment regarding it did not disturb the status quo and thus, did not violate Section 362(a)(3). In re Censo, 638 BR 416 (9th Cir BAP, 2022). The rationale is that the automatic stay is inapplicable in lawsuits brought by the debtor, and a defendant can defend itself without an automatic stay violation.

    Wage Garnishments and Fulton

    While Stuart above was a bank account case, the BAP said in footnote 12 that, if it were a wage garnishment case where the creditor captured funds postpetition, the result would be different and a stay violation. Stuart v City of Scottsdale, 632 BR 531 (9th Cir BAP, 2021), citing In re LeGrand, 612 BR 604 (Bankr Ct EDCA, 2020).

    Chapter 13 Codebtor Stay

    What is the Co-debtor Stay?

    Chapter 13 has a codebtor stay, while Chapter 7 doesn’t. Section 1301 and its co-debor stay protects the person who may owe on a debt without that other person having to file bankruptcy. For this reason, Chapter 13 can protect a non-filing spouse better than a Chapter 7 bankruptcy.

    Community liability: you both owe the debts of the marriage

    California’s Family Code 910 says:

    Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.

    Further, Calif Family Code 914 says:

    …a married person is personally liable for the following debts incurred by the person’s spouse during marriage …a debt incurred for necessaries of life of the person’s spouse before the date of separation of the spouses.

    Translating that, because California is a community property state, both spouses owe a debt during the marriage, regardless of who is managing the budget, or racking up the debt. You’re in this together.

    So, if one half of a married couple incurred a lot of debt and files bankruptcy in Chapter 13, the other innocent spouse is protected by an automatic codebtor stay. In Chapter 7, the innocent spouse can still be called and harassed and risk losing any separate property (if any) to the spouse’s collecting creditors. Why? FC 914(b) says that the “separate property of a married person may be applied to the satisfaction of a debt for which the person is personally liable pursuant to this section.”

    Section 1301 Co-debtor stay to the rescue

    Now we know that a spouse (or other person who may owe on a debt) is liable for debts during a marriage, even though they didn’t incur them or even have any credit cards. If the spending spouse files bankruptcy, the innocent spouse may be left hanging in Chapter 7. But Chapter 13 has a solution.

    Section 1301 says

    creditor may not act, or commence or continue any civil action, to collect all or any part of a consumer debt of the debtor from any individual that is liable on such debt with the debtor

    There it is. A creditor may not act, start or keep doing something to someone liable on a debt with a debtor. In California, that’s typically a spouse. Automatic stay for the nonfiling spouse in the form of the co-debtor stay is a big benefit to Chapter 13 bankruptcy.

    The hitch: creditors claim to not know about spouses & the codebtor stay

    Amazingly, with all their fancy computers, creditors and their collection companies don’t have a way to know about or track nonfiling spouses. If John Doe files bankruptcy, they’ll flag his account, but they don’t know about Jane Doe, even though she’s listed as a Codebtor in the bankruptcy paper’s Schedule H. They do a scrub or routine check but will say they don’t know Jane’s SSN as a way to flag her, too. So they keep collecting against her, which pressures John, but golly, it’s just an accident.

    This can require “educating” the creditor with notice of the stay before bringing an action for violation of the stay against them for harassing the spouse, in our example, Jane. The fallback position of the fancy slick credit card company will default to becoming Barney Fife. The billion-dollar corporation will morph into bumbling inept two-bit outfit in court who just didn’t know about the spouse and therefore didn’t have notice or any way to possibly avoid this and and thus will seek mercy from the bankruptcy judge for its incompetence. Thus, more notice, more evidence that the creditor knew about the spouse and the bankruptcy, will help you bring your violation of codebtor stay action and prevail.

    Actions which are not violations of the Automatic Stay

    While the bankruptcy protection of the automatic stay is wide and broad, we’ve seen with Fulton that it does have its limits. One other such limit is collection on a nondischargable debt upon property outside the bankruptcy estate.

    That was the issue the Ninth Circuit BAP faced when it ruled, “‘Nevertheless, binding authority is clear that “the automatic stay provisions of Section 362 do not preclude the execution of a judgment, which has been held by the bankruptcy court to be non-dischargeable, upon property of the debtor which is not property of the estate.'” In re Cady, 266 BR 172, 180 (9th Cir BAP, 2001).

    Damages: the Penalty for Automatic Stay Violations

    The automatic stay is one of the few areas in bankruptcy where debtors can get their attorney fees paid by the creditor. The Bankruptcy Code provides at Section 362(k) that:

    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.

    Let’s look at these one at a time.

    Compensatory: Actual Damages

    Costs

    Actual damages comes in a couple different flavors. First, it’s whatever the debtor is truly, actually out-of-pocket as a result of the violation of the automatic stay. Judges typically want to see receipts. It can include as mundane things as copying costs, doctor visit copays, and so on.

    Attorney Fees

    In addition, the statute explicitly calls for the debtor getting reimbursed by the creditor for attorney’s fees. The lodestar method for attorney compensation is used in the Ninth Circuit bankruptcy cases. In re Yermakov, 718 F.2d 1465, 1471 (9th Cir. 1983). Lodestar compensation is “strongly” presumed to be reasonable. Burgess v. Klenske, 853 F.2d 687, 691-92 (9th Cir. 1988). The only limit on attorney’s fees is if the work was unnecessary or plainly excessive. The Ninth Circuit Court of Appeals, sitting en banc, concluded that Section 362 authorizes an award of attorney fees incurred in prosecuting an action for damages under the statute, limited by unnecessary or plainly excessive fees. In re Schwartz-Tallard, 803 F.3d 1095, 1101 (9th Cir 2015)(en banc), overturning Sternberg v Johnston, 595 F.3d 937 (9th Cir, 2010).

    Emotional Distress

    Emotional distress damages are available in the Ninth Circuit “if the individual provides clear evidence to establish that significant harm occurred as a result of the violation.” In re Dawson, 390 F3d 1139, 1148-1149 (9th Cir, 2004).

    Punitive Damages

    The statute calls for punitive damages in appropriate circumstances. The definition of “appropriate circumstances” varies by judicial circuit. Here in the Ninth Circuit, it means that punitive damages for violations of the Automatic Stay require “some showing of reckless or callous disregard for the law or rights of others.” In re Bloom, 875 F.2d 224, 227 (9th Cir., 1989).

    The dreaded Wells Fargo case

    Wells Fargo is notorious for their national policy of administrative freeze or holds, officially called “temporary administrative pledges” (which I wrote about in my list of 12 crucial things to do before filing bankruptcy). This is where someone files bankruptcy and has money on account at Wells Fargo. Then the bank freezes the account so the debtor can’t buy groceries. One would think this is a violation of the automatic stay, but it’s not an attempt to collect a debt, but to protect assets of the estate.

    The Ninth Circuit BAP ruled that because defendant exercised control of debtor’s assets postpetition, debtors “have standing to seek sanctions against Wells Fargo pursuant to § 362(k) for willful violation of the stay with respect to their interest in estate property.” In re Mwangi, 432 BR 812, 825 (9th Cir BAP, 2010). But on appeal, the Ninth Circuit Court of Appeals said that the property, while exempt, is property of the estate, but somehow does not immediately revest to the debtor, but must wait 30 days for the FRBP 4003(b)(1) exemption objection time period to lapse. In re Mwangi, 764 F3d 1168 (9th Cir, 2014).

    The court analyzed it as a 362(a)(3) situation (control of property), but if it were the more common commencement or continuance of an action of 362(a)(1), the result likely would’ve been different. So, the Wells Fargo case is not an erosion of the automatic stay.

    Conclusion

    The automatic stay is a powerful tool to protect your client in a bankruptcy. However, you must enforce it, and have proper documentation of evidence. I’ve successfully brought actions against major credit cards for violating the stay; it can be done. if you found this helpful and are faced with a stay violation issue, consider hitting the figurative tip jar. Regardless, thank you for reading, and never stop fighting for your client and the debtor’s rights. You have significant tools and bankruptcy protections here, and you should not hesitate to hold the creditor accountable for flaunting them.