Jones Versus Wells Fargo Addresses The Rights Of Debtors In Bankruptcy Part Four

In Part Three of this article we discussed the Court’s findings with respect to whether the charges assessed by Well Fargo, both prepetition and postpetition, violated the bankruptcy stay.

Having performed its analysis and having found many of the charges and fees to be unwarranted and/or unauthorized violations of the stay, the Court then turned its attention to what damages Jones sustained as a result of the violation of the stay by Wells Fargo.

In determining the amount and type of damages, the Court began its analysis by noting that the calculation of a debtor’s disposable income includes the installment payments accruing post confirmation on a loan, but does not include an allowance for the additional fees and costs assessed by Wells Fargo. Thus, when Wells Fargo applied any portion of Jones’ earnings to undisclosed fees and charges, rather than the installments owed under the note and payable under the plan, it reduced Jones’ ability to pay either the reasonable and necessary costs of his support, or the amounts due under his plan.

Jones maintained that the actions of Wells Fargo in applying payments to undisclosed fees and charges as well as its actions in overstating the payoff were willfull violations of the stay provisions of the Bankruptcy Code entitling Jones to recover fees, costs, and damages under 11 U.S.C. § 362(h).

Jones sought both actual and punitive damages.

In responding to Jones’ position, Wells Fargo stated that its actions in violating the stay were not willful.

However, the Court noted that a willful violation does not require a specific intent to violate the stay, as the statute provided for damages as long as Wells Fargo knew of the existence of the automatic stay and its actions were intentional. The Court found that Wells Fargo knew of the stay and yet intentionally assessed and collected fees and costs without Court authority.

The Court found that the inclusion and payment of the Sheriff’s costs, particularly without giving Jones a reasonable opportunity to review them and without supporting documentation, resulted in a payment that was “clearly an amount that was not owed.”

The Court ordered Wells Fargo to return to Jones the Sheriff’s costs and postpetition charges and fees that were charged to Jones.

After reviewing the various amounts assessed and collected by Wells Fargo, the Court determined that Jones had owed $207,013.32 on January 4, 2006, the date of his refinancing, instead of the $231,463.97 collected by Wells Fargo.

Wells Fargo was ordered to pay $24,450.65 subject to a credit of $7,598.64 that had been returned on April 20, 2006, for a balance due to Jones of $16,852.01 plus judicial interest until paid.

The Court denied Jones request for damages incurred as a result of the loss of personal time finding that there was no evidence that he missed work or incurred a loss of income.

In Part Five we will look at the Court’s analysis of whether Wells Fargo’s actions warranted the imposition of sanctions.