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Real world impact of Sternberg

By Cathy Moran

Bankruptcy practitioners were dismayed by the 9th Circuit’s decision in Sternberg which parsed the provisions of section 362(k) to limit the award of attorneys fees against creditors who violated the automatic stay.  This week I saw the real world impact of that pernicious decision.

Young bankruptcy attorney is reluctant to take up kudgel for debtor seriously abused by creditor after the filing of the bankruptcy petition, including explicit threats against the debtor should he object to the stay violations.  Pre Sternberg, it was understood that the attorneys fees to enforce the stay were a part of the damages.  Now, at least under § 362, attorneys fees may be limited to those necessary to stop the violation, but not to collect damages for the violation.

The 9th Circuit, in my opinion, provided little guidance on how the attorneys fees to stop the violation are to be collected or how to allocate fees between stopping the violation and collecting damages.  The second amended opinion added a footnote to the effect that attorneys fees may be awardable under other provisions of the bankruptcy code.

So my friend has to now calculate whether to take up a meritorious cause for this debtor, wondering whether the fight could be financially ruinous to the attorney: lots of work against a determined and deep pocketed miscreant and little reward at the end.

If the risk of non payment scares competent and energetic counsel off of the vindication of bankruptcy rights, we have all lost.

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About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Comments

  1. Karin Frank says

    October 14, 2011 at 10:59 am

    I am fighting this in pro se. My Ch 11 plan was confirmed, 4-18-2011 I have 4 loans with Chase bank who has decided not to accept payments, or accept but not credit the payments. A foreclosure is pending, and an NOD has been filed. I filed a motion to have the court order Chase to cease and desist, but the Judge wants me to do an adversary proceeding. I think Chase is taking advantage of my pro se status. They are so crooked.

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You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

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Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

How Bankruptcy Works

What Happens To Your Bank Account in Chapter 13

Those considering filing a Chapter 13 bankruptcy worry about "what happens to my bank account?" Will the trustee take all the money? How do I pay my living expenses after I file? The short answer is: nothing changes. The account remains yours and available for all the expenses of day to day living. Because, … Read more

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