Sunday, March 1, 2015

Creditor Lacks Standing to Bring Automatic Stay Claim, Bankruptcy Panel Rules


On Friday, the Ninth Circuit Bankruptcy Appellate Panel affirmed an order denying a creditor's claim for damages resulting from an automatic stay violation.



The case, In re Yan, involved a creditor who sought fee reimbursement and punitive damages against a consumer who previously filed bankruptcy.

The bankruptcy judge determined that the consumer had willfully violated the automatic stay by suing the creditor in state court.

However, the creditor's motion was ultimately denied because the judge determined the creditor lacked standing to bring a claim under the automatic stay.

On appeal, the panel agreed with the bankruptcy judge that the creditor lacked standing to sue the debtor. 


The panel recognized that Congress intended the automatic stay to protect debtors and trustees, not creditors. The panel was also persuaded by the fact that the creditor's claim had already been paid in full by the trustee. 

The panel also ruled that the bankruptcy judge had no inherent authority to sanction the debtor for conduct that took place in state court.