February 21, 2017

Picture this all-too-common scenario: A creditor fiercely attempts to enforce its judgment against a debtor. It jumps through all of the proper hoops: waiting 28 days from the date of the judgment, obtaining a garnishment, and recording a judgment lien. Despite these valiant efforts, the judgment has not been satisfied. The creditor pulls out the next tool in its tool belt, a debtor’s exam. The creditor tees up the debtor’s exam and issues a subpoena. The creditor shows up for the hearing but the debtor does not. Thereafter, the court issues a bench warrant for the debtor’s failure to comply with the terms of the subpoena.

After the bench warrant is issued but before the debtor satisfies the judgment, the debtor files for bankruptcy. Is it a violation of the automatic stay if the creditor fails to recall the bench warrant? The answer is yes. Almost all courts that have been faced with this issue find that the creditor has an affirmative duty to recall a bench warrant, which is the subject of a civil proceeding. “[A] creditor, or an attorney, who has notice of a bankruptcy filing and had previously caused a bench warrant to be issued in order to collect a debt, has an affirmative duty to request that the warrant-issuing court recall the warrant.” Galmore v Dykstra (In re Galmore), 390 BR 901, 914 (Bankr ND Ind, 2008). “Creditor's use of the state court contempt proceedings was in furtherance of its collection action. And even though the arrest warrant was issued prebankruptcy, maintenance of that collection action in the form of the potential enforcement of the arrest warrant was prohibited by operation of the automatic stay once the bankruptcy case was commenced.” In re Daniels, 316 BR 342, 349 (Bankr D Idaho, 2004). Thus, failure to recall a bench warrant in a pending civil proceeding is a violation of the automatic stay.

 

While there may be a violation of the automatic stay, the pertinent question in almost all of the cases is whether the actions of the creditor are “willful”, pursuant to 11 U.S.C. § 362(h), warranting damages. The courts take the “willful” analysis under a case-by-case approach. Certainly, the timing between the issuing of the warrant and its actual execution is relevant. See Atkins v Martinez (In re Atkins), 176 BR 998, 1008 (Bankr D Minn, 1994) (finding the debtor’s actions were not willful because the issuance of the bench warrant and the filing of bankruptcy were approximately a year apart. The creditor did not act deliberately, but instead was only negligent in recalling the bench warrant). The courts also look at the means by which the bench warrant is executed. See Galmore v Dykstra (In re Galmore), 390 BR 901, 904 (Bankr ND Ind, 2008) (finding punitive damages were appropriate when the creditor appeared at the 341 hearing and demanded that the debtor be arrested). Finally, some courts look at the results of the bench warrant. See Iskric v Commonwealth Fin Sys (In re Iskric), 496 BR 355, 364 (Bankr MD Pa, 2013) (finding emotional damages were appropriate because debtor experienced anxiety, fear for her safety, and disrupted sleep as a result of her imprisonment).

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