Bankruptcy – Automatic Stay – Willful Violation – Real Property – Mortgage Foreclosure – Misspelled Name – Punitive Damages

In re Gallo (Lawyers Weekly No. 12-05-0973, 11 pp.) (William L. Stocks, J.) 07-10958C-13G; M.B.N.C.

Holding: Despite having notice of the debtor’s bankruptcy, and despite notes in their own files about the misspelling of the debtor’s name, since the creditors’ software program failed to list the debtor’s name in a bankruptcy search result, the creditors continued their collection efforts against the debtor, going so far as to schedule a foreclosure.

The creditors willfully violated the automatic stay. The debtor is entitled to recover his actual damages of $5,115 in attorney’s fees and punitive damages of $10,000.

The more common version of the debtor’s first name is spelled “Jeffrey” while the debtor’s name is spelled “Jeffery.” The software program used by the creditors when the alleged automatic stay violations occurred required manual inputting of a mortgagor’s name into the program. During this process, the creditors allege that the debtor’s name was incorrectly transcribed as the more common version, “Jeffrey.” As a result, the creditors contend that, when they checked to determine whether the debtor was in bankruptcy, his case was not listed as a search result. Relying upon the absence of a record listing the debtor’s case, the creditors continued their debt collection activities, despite official notice of the bankruptcy and communications from the debtor’s attorney and bankruptcy trustee.

The debtor has shown a willful violation of the automatic stay.

Even though the creditors may have misspelled the debtor’s name in making entries in their software program, they received the letter from the trustee correctly spelling the debtor’s name. Moreover, several notations were made in the debtor’s file which commented on the misspelling of the debtor’s first name and urged a correction, which apparently was never made. The failure of the creditors to fix their own error does not save them from a finding of a willful violation of the automatic stay.

The debtor has established actual damages consisting of $5,115 in attorney’s fees related to and necessitated by the creditors’ willful violation of the automatic stay.

Furthermore, the creditor’s willful violation of the automatic stay involved egregious and intentional misconduct which warrants the imposition of punitive damages.

The creditors report that, on May 15, 2012, they started using a new software program which should eliminate problems associated with incorrectly inputting debtor information into their software program. Although the court appreciates this remedial measure, it does not erase the egregious actions that occurred earlier. The creditors became aware that the debtor’s name was misspelled and failed to correct the misspelling even after receiving further notifications from the bankruptcy trustee and the debtor’s attorney. As a result of their failure to correct an internal error even after having noted the error, the creditors continued to willfully violate the automatic stay.

The debtor’s motion for sanctions is granted.