11 U.S.C. §362; Automatic Stay
In re Roche (Roche v. Pep Boys, Inc.), 2005 Bankr. LEXIS 2780, Adv. No. 05-9040 (Bankr. N.D. Ga. December 29, 2005)(Diehl)
The creditor had obtained a pre-petition judgment against debtor and had served a garnishment on debtor’s bank account. After the garnishment was served but before the funds were remitted to the creditor, debtor filed a Chapter 13 petition. Debtor claimed as exempt the entire proceeds of the checking account and immediately notified the creditor of the filing of the petition. The creditor, however, refused to release the funds.
The first issue was whether the creditor violated the automatic stay by not dismissing the garnishment. The creditor argued that it had a valid lien on the funds pursuant to state law and that the U.S. Supreme Court in Citizens Bank v. Strumpf, 516 U.S. 16, 116 S.Ct. 286 (1995) recognized that a lienholder had rights in the property and was entitled to adequate protection under § 553. The court, however, noted that the creditor in Strumpf filed a motion for relief from stay and sought permission to effect a set-off within five days of placing a hold on the debtor’s account. In the case sub judice, the creditor took no affirmative action in seeking relief from the stay, adequate protection or an order prohibiting the use of cash collateral. The creditors refusal to dismiss the garnishment was contrary to the purpose of the automatic stay, and therefore, the creditor’s actions violated the stay.
The court further found that because the creditor had knowledge of the automatic stay and took no steps to dismiss the garnishment or seek a ruling from the court. Finally, although the debtor was entitled to show her actual damages, because there were some cases that could be construed as supporting the creditor’s position, and the court had not previously ruled on the issue, punitive damages were not warranted.