What happens when a mortgage lender violates the Automatic Stay in the Eastern District of California? Just ask Bank of America. In a recent ruling, Judge Christopher Klein awarded over $46 million in damages against the bank.

The Automatic Stay

The automatic stay is one of the cornerstones of bankruptcy law. The automatic stay protects bankruptcy filers from collection activity during the pendency of their bankruptcy.

The purpose of the automatic stay is to allow bankruptcy filers some breathing room to sort through their financial issues. The stay also prevents creditors from rushing to collect the last vestiges of the debtor’s assets.

Violating the automatic stay can result in a finding of contempt of court. Courts have the power to award damages against the stay violator.

Sundquist v. Bank of America

Judge Klein’s ruling is 107 pages long. The brief summary is this: Bank of America foreclosed on the Sundquist’s home despite having actual knowledge of their bankruptcy filing. This unlawful act triggered years of consequences for the Sundquists.

There was already bad blood between the Sundquists and Bank of America. As a couple caught up in the Great Recession, the debtors had to fight with Bank of America for years to try to obtain a mortgage modification. Uniquely in this case, Mrs. Sundquist kept a contemporaneous journal of her struggle. This evidence would prove to be very powerful at trial.

In his ruling, Judge Klein eviscerates Bank of America for their treatment of the debtors. In fact, it was very clear that the bank had ample notice of the automatic stay, and repeatedly acted to violate the stay.

Over $46 Million in Damages

Judge Klein awarded over $46 million in damages to the debtors. Judge Kelin intends that the eye-popping fine sends a message to Bank of America. In fact, Judge Klein wrote that the large amount would not “be laughed off in the boardroom as petty cash or ‘chump change’.”

California’s public law schools and consumer advocacy groups will benefit from $40 million of the punitive damages.

The Sundquists, for their trouble, are set to receive over $1 million in actual damages and $5 million in punitive damages.

Violations of the Automatic Stay in Bankruptcy are very serious. If you believe that a creditor has violated the stay in your bankruptcy, please call my office at (916) 333-2222.