Search the term “stay violation” on any consumer bankruptcy blog and you will find stories of situations where creditors get hit with well deserved sanctions for their failure to stop harassing a debtor despite knowledge of a bankruptcy filing. Despite the trend in the law to give creditors more protections, bankruptcy judges are generally extremely protective of debtors when it comes to automatic stay violations. The automatic stay functions as the core protection of bankruptcy and creditors violate the stay at their peril.
Unfortunately, however, bad facts truly do make bad law. Now we have a case where a sincere, well-intentioned creditor is being hit with sanctions for what appear to be innocent actions against a debtor with less than clean hands. The case involves a Connecticut homeowner named Mark Poveromo who got slammed for sanctions after he pursued criminal sanctions against a dishonest contractor who used a bad address for Mr. Poveromo in this Missouri bankruptcy filing.
I suspect that most objective observers would conclude that creditor Poveromo was the wronged party here, after being ripped off by his contractor, spending money for two plane tickets and dealing with a judge who refused to let him appear telephonically. Nevertheless, this case shows how seriously bankruptcy judges treat stay violations even in situations where the debtors are very unsympathetic.
A bigger concern, however, is the likelihood that creditor advocates will use cases like this one to push Congress to erode automatic stay protections. My experience has been that most stay violation cases involve bullying creditors and fact patterns like the one in this case are rare. I will not be surprised to see efforts by lawmakers to reduce automatic stay protections.