The automatic stay arguably represents the most powerful tool available to a debtor seeking a fresh start through bankruptcy. Not surprisingly, therefore, courts tend to strictly enforce the stay and will often impose penalties, particularly under circumstances where the stay violation was intentional. For that reason, a recent U.S. Court of the Appeals for the Tenth Circuit opinion presents an interesting counterpoint by concluding that a willful violation of the automatic stay did not require the imposition of damages under circumstances where it would be fruitless to do so and contrary to the overall purposes of the Bankruptcy Code. (See Rushton v. Bank of Utah (In re C.W. Mining Co.), Ch. 7 Case Bankr. No. 08-20105, Adv. No. 10-02712, 2012 Bankr. LEXIS 4114 (B.A.P. 10th Cir. Sept. 5, 2012).)
In C.W. Mining Co., a bank provided financing to a debtor coal company that was secured by the debtor’s equipment and a $362,000 certificate of deposit. After the debtor was involuntarily placed into Chapter 7, the bank liquidated the CD in partial satisfaction of its claims and then sold the balance of the loan to a third party. The bank was apparently aware of the debtor’s pending bankruptcy resulting in the Bankruptcy Appellate Panel’s conclusion that the stay violation was willful.
