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Consumer Financial Services Corporation v. Reginald Alexander

February 24, 2011


The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge


This matter is before the court on Appellant Consumer Financial Services Corporation's (CFS) appeal from the ruling of the bankruptcy court in bankruptcy case number 10 B 15686. For the reasons stated below, this court affirms the bankruptcy court.


On April 6, 2010, CFS repossessed Appellee Reginald Alexander's (Debtor) car (Car). On April 9, 2010, Debtor filed for Chapter 13 Bankruptcy. Debtor claims that he immediately requested the return of the Car pursuant to the automatic bankruptcy stay. According to Debtor, CFS initially refused to return the Car, unless Debtor paid the repossession costs and storage fees. Debtor contends that he then informed CFS that if the Car was not immediately returned, he would file a motion for sanctions with the bankruptcy court. CFS allegedly failed to return the Car and on April 14, 2010, CFS instead filed an Emergency Motion to Annul the Automatic Stay (Motion to Annul). Debtor then filed a Motion for Sanctions, based on CFS's failure to immediately return the Car. CFS then allegedly agreed, on April 17, 2010, to return the Car, but conditioned the return on the withdrawal of the Motion for Sanctions.

On April 16, 2010, the parties appeared before Chief Judge Doyle, sitting in place of Judge Squires, on CFS's Motion to Annul. On April 20, 2010, the parties again appeared before Chief Judge Doyle, and Chief Judge Doyle set a status hearing for April 23, 2010, indicating that she might hold an evidentiary hearing. On April 23, 2010, Chief Judge Doyle concluded that an evidentiary hearing was not necessary and that CFS had willfully violated the automatic bankruptcy stay. Chief Judge Doyle also denied CFS's Motion to Annul and ordered the immediate return of the Car.

On July 9, 2010, the parties appeared before Judge Squires on the Motion for Sanctions, and Judge Squires gave the parties time for additional briefing on the motion. On August 27, 2010, the parties appeared before Judge Squires, and he granted the Motion for Sanctions since CFS had willfully violated the automatic bankruptcy stay. Judge Squires ordered CFS to pay Debtor $200.00 in actual damages, $3,038.75 in attorneys' fees, and $9,600.00 in punitive damages. CFS appeals from the August 27, 2010 ruling by Judge Squires granting the Motion for Sanctions. CFS also appeals the ruling by Chief Judge Doyle finding that CFS had willfully violated the automatic bankruptcy stay.


A federal district court has jurisdiction, pursuant to 28 U.S.C. § 158, to hear appeals from the rulings of a bankruptcy court. Id. On appeal, the district court reviews the factual findings of the bankruptcy court under the clearly erroneous standard and reviews the bankruptcy court's legal findings under the de novo standard.Wiese v. Community Bank of Cent. Wis., 552 F.3d 584, 588 (7th Cir. 2009)(stating that the court "review[s] the bankruptcy court's determinations of law de novo and findings of fact for clear error," but "where the bankruptcy code commits a decision to the discretion of the bankruptcy court, we review that decision only for an abuse of discretion");see also In re A-1 Paving and Contracting, Inc., 116 F.3d 242, 243 (7th Cir. 1997)(stating that a "bankruptcy court's findings of fact are upheld unless clearly erroneous and the legal conclusions are reviewed de novo"). Where there are mixed questions of law and fact, the district court conducts a de novo review. Freeland v. Enodis Corp., 540 F.3d 721, 729 (7th Cir. 2008).


CFS contends that it did not violate the automatic bankruptcy stay and that if it did violate the stay, Debtor did not show that it was a willful violation. CFS also contends that the sanctions were not warranted, contending that Debtor had failed to establish actual damages or show that punitive damages were warranted. Pursuant to 11 U.S.C. § 362(a), when a bankruptcy petition is filed, there is an immediate "automatic stay of efforts outside the bankruptcy proceeding to collect debts from the bankrupt debtor." In re Radcliffe, 563 F.3d 627, 630 (7th Cir. 2009)(explaining that "[b]ringing all debts within the jurisdiction of the bankruptcy court allows for the orderly distribution of assets"). The automatic bankruptcy stay "operates as a stay . . . of" actions, such as "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate. . . ." 11 U.S.C. § 362(a)(3). In regard to the recovery of damages for a violation of the automatic bankruptcy stay, 11 U.S.C. § 362 provides the following:

(k)(1) Except as provided in paragraph (2), an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages.

(2) If such violation is based on an action taken by an entity in the good faith belief that subsection (h) applies to the debtor, the recovery under paragraph (1) of this subsection against such entity shall be limited to actual damages.

11 U.S.C. § 362(k).

I. Willful Violation of Automatic ...

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