Are Emotional Damages Recoverable When A Creditor Violates The Automatic Stay?

by Peter Orville, Binghamton Bankruptcy Lawyer

May 31, 2008

Once a court has held that a creditor has willfully violated the automatic stay, it turns to the issue of damages. Certainly verifiable out-of-pocket expenses suffered by the debtor are fully recoverable. So are the attorney fees incurred for having to bring the motion or adversary proceeding.

But are “emotional” damages recoverable by the debtor? Many, if not most bankruptcy courts have held that emotional damages are recoverable from a creditor who has violated the automatic stay. They concluded that the intent of Congress was to compensate for emotional damages because of the stated legislative intent to give debtors a “breathing spell” from creditor harassment. The Vermont bankruptcy court held that; “Emotional distress is an actual injury. Legitimate human emotions are brought to bear when one’s rights are trampled on.”

Other courts that have held that emotional damages are recoverable include:
*1st Circuit Court of Appeals
*9th Circuit Court of Appeals
*Massachusetts Bankruptcy Court
*Vermont Bankruptcy Court
*Eastern District Virginia Bankruptcy Court
*Southern District Virginia Bankruptcy Court
*Vermont Bankruptcy Court
*Southern District New York Bankruptcy Court
*Southern District Florida Bankruptcy Court
*Eastern District Pennsylvania Bankruptcy Court
*Oregon Bankruptcy Court
*Southern District Georgia Bankruptcy Court
*Southern District Alabama Bankruptcy Court

One question that often arises when a motion or adversary proceeding to award emotional damages to a debtor is brought to trial, is whether it is necessary for the debtor to introduce medical evidence to prove the emotional damages. Several courts agree that while these damages can be difficult to quantify, they do not require expert medical testimony. These courts believe that damages can be established by the testimony of the debtor and others. The following courts agree that medical testimony is not needed:
*Southern District Alabama Bankruptcy Court
*Southern District Ohio Bankruptcy Court
*Southern District Georgia Bankruptcy Court
*Northern District Ohio Bankruptcy Court

Two courts have ruled that emotional damages are recoverable, but require expert evidence because they believe that such damages can be easily manufactured. These courts are:
*Northern District Ohio Bankruptcy Court (a different court than cited above)
*Central District Illinois

There are courts that have held that Congress did not intend to compensate for non-financial losses. These courts include the 7th Circuit Court of Appeals and yet another court in the Northern District of Ohio.

In the Northern District of New York Bankruptcy Court one judge has not yet ruled on the issue, but the other two judges have ruled that emotional distress is recoverable. Judge Gerling held that “emotional distress is an injury itself, and, therefore, may be the basis for an award of actual damages, even where no financial injury has been demonstrated.” Judge Littlefield awarded one debtor $30,000.00 for emotional damages, without requiring the use of expert medical evidence.

If you have filed a bankruptcy case and have continued to receive any collection activity by creditors, you should immediately get the evidence of this activity to your bankruptcy attorney. If you have not yet filed bankruptcy, you would be well served by contacting one of the Bankruptcy Law Network attorneys near you. To find a Bankruptcy Law Network attorney, just look on the right side of this page under “Attorneys in our network”.

Much of the material provided in my last few articles involving violations of the automatic stay were gathered by attorney James Selbach of Syracuse, New York, who has vigorously prosecuted violation of automatic stay cases in the Northern District of New York.

If anyone would like specific citations for the court decisions referred to in these articles, please send a comment on this article requesting the specific citation.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.

Last modified: June 1, 2008