Bankruptcy triggers the automatic stay – a command, not a suggestion, that collection activity cease. This is common knowledge, but every once in a while a case comes along that merits sharing as a reminder of what happens when lenders ignore the Bankruptcy Code.
In May 2018, Jenny Lynn Edwards bought a 2003 Harley-Davidson from B&E Transport for $10,000. She put $2,500 down and financed the balance. The motorcycle was her only source of transportation. On Halloween 2018, she filed a Chapter 13 bankruptcy petition. When she filed, she was current on her payments to B&E. She listed B&E as a creditor in her schedules and her plan proposed to pay B&E in full with interest.
No lender likes to see their borrower file bankruptcy, but this should have appeared like a reasonable way for B&E to get repaid. Fast forward one year, and B&E now owes Ms. Edwards almost $40,000. How did B&E go from a secured creditor with a current loan and a path to repayment to a judgment debtor? By engaging in a spectacular array of stay violations and disregard for the Code and the Court. Let us count the ways:
- B&E repossessed the motorcycle on November 2, 2018 – two days after the bankruptcy filing and even though Ms. Edwards was current on her payments. B&E then accelerated the note and demanded full payment.
- B&E never sought relief from the automatic stay.
- Counsel for Ms. Edwards and Ms. Edwards’ husband communicated with B&E, told B&E about the bankruptcy and the stay violation and demanded B&E return the motorcycle. B&E refused, doubling down on their improper behavior and, as the Court stated, making “a bad situation worse.”
- Edwards then sued B&E for damages for the automatic stay violation. B&E ignored the lawsuit and kept the motorcycle, apparently deciding they would ignore the Bankruptcy Code and the Bankruptcy Court.