In re Briskey, 01-239-WRS.

• Decision Date: 05 February 2001
• Docket Number: No. 01-239-WRS.,01-239-WRS.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Alabama
• Parties: In re Marshall BRISKEY, Debtor.

258 B.R. 473 (2001)

In re Marshall BRISKEY, Debtor.

No. 01-239-WRS.

United States Bankruptcy Court, M.D. Alabama.

February 5, 2001.

COPYRIGHT MATERIAL OMITTED

Charles M. Ingrum, Opelika, Alabama, for debtor.

Curtis C. Reding, Montgomery, Alabama, Chapter 13 Trustee.

ORDER DENYING MOTION TO RELEASE GARNISHMENT AND DENYING MOTION FOR EXTENSION OF TIME TO BEGIN MAKING PAYMENTS UNDER CHAPTER 13 PLAN

WILLIAM R. SAWYER, Chief Judge.

This Chapter 13 case is before the Court upon two separate motions filed the Debtor: (1) Motion for Release of Garnishment (Doc. 7); and (2) the Debtor's Motion to Extend Time to Begin Chapter 13 Payments. (Doc. 9). For the reasons set forth below, both motions are DENIED.

I. FACTS

On December 22, 2000, the State of Alabama, Department of Revenue issued garnishment process against the Debtor's earnings with his employer.¹ On January 12, 2001, the Debtor filed a petition pursuant to Chapter 13 of the Bankruptcy Code in this Court. The Debtor filed Schedules of his assets and liabilities and a Statement of Financial Affairs with his petition together with a matrix. The Schedules did not list the Debtor's indebtedness to the State of Alabama and the Statement of Financial Affairs did not report that any wages had been seized.² In addition, the Alabama Department of Revenue is not listed on the mailing matrix which was filed with the petition and other papers. Shortly after a bankruptcy case is filed, a notice of commencement of the case is sent to all creditors. Needless to say, a creditor who is not listed on the matrix does not receive notice of the commencement of a bankruptcy case from the Court. See Mitchell Construction Co., Inc. v. Smith (In re Smith), 180 B.R. 311, 313 n. 5 (Bankr.N.D.Ga.1995) (describing mechanics of filing schedules and the mailing matrix at the beginning of a Chapter 13 case).

On January 22, 2001, the Debtor filed the two motions described above together with amended schedules and an Amended Chapter 13 Plan. When a debtor amends his schedules, he is required to give notice to any entity affected by the amendment. FED.R.BANKR.P. 1009(a). The Debtor filed Certificates of Service which reflect that motions were served upon the State of Alabama, however, it does not appear that the amended schedules were served as required by Rule 1009(a). The record does not reflect that the Debtor made any attempt to put the State of Alabama on notice of his bankruptcy filing prior to January 22, 2001, when he filed and served the two motions in question.

A. MOTION TO RELEASE GARNISHMENT

The filing of the Chapter 13 petition in this case gave rise, by operation of law, to an automatic stay which stays almost all actions to collect preexisting indebtedness, including garnishment proceedings. 11 U.S.C. § 362(a).³ It is not necessary that the Debtor or the Court take any affirmative action, such as entering a specific order, to give rise to the automatic stay as the filing of the petition gives rise to the automatic stay. The automatic stay is intended to stop virtually all collection efforts and it is intended to operate automatically. Which, not coincidentally, is why it is called the automatic stay. The automatic stay is "one of the fundamental debtor protections provided by bankruptcy laws." Midlantic National Bank v. New Jersey Dept. of Environmental Protection, 474 U.S. 494, 503, 106 S.Ct. 755, 761, 88 L.Ed.2d 859 (1986) (quoting S.Rep. No. 989, 95th Cong., 2d Sess. 54 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5840; H.R.Rep. No. 595, 95th Cong., 1st Sess. 340 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5963, 6296). The provisions of this section execute by operation of law. Actions taken in violation of the automatic stay are void ab initio. In re Albany Partners, 749 F.2d 670, 675 (11th Cir.1984); Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir.1982). The automatic stay is necessary to permit the debtor breathing space so that he may reorganize his affairs, free from the harassment of wage garnishments, foreclosure proceedings and repossessions. The scope of the automatic stay is necessarily broad so that debtors may reorganize their affairs in an orderly and equitable fashion.

In a garnishment proceeding, no amounts should be seized or withheld from the Debtor's wages after the filing of a bankruptcy petition. It is clear beyond all doubt that garnishing creditors are required to take all necessary action to release their garnishments in order to implement the automatic stay, upon receiving notice of a bankruptcy filing. This is true even if the garnishment process became effective prior to the date of the bankruptcy filing and did not, at the time it first became effective, violate the automatic stay. Indeed, the creditor must not only cease from taking any affirmative action which would violate the automatic stay, it must also take all necessary affirmative action to stop proceedings which are in violation of the automatic stay. See In re Johnson, 253 B.R. 857, 861 (Bankr. S.D.Ohio 2000) (actual damages in the amount of $6,669.00, damages for emotional distress in the amount of $1,000.00 and punitive damages in the amount of $1,000.00 imposed jointly against creditor and creditor's lawyer who failed to take affirmative steps to release a garnishment); In re Banks, 253 B.R. 25 (Bankr. E.D.Mich.2000) (ignorance of law no excuse; real estate company who failed to vacate a writ of restitution and stop eviction after receipt of notice of bankruptcy filing held liable for damages); In re Manuel, 212 B.R. 517, 518 (Bankr.E.D.Va.1997) (creditor and its lawyer who refused to take affirmative steps to release a garnishment after receipt of notice of bankruptcy filing required to pay debtor's attorney fees); In re Mims, 209 B.R. 746, 748 (Bankr.M.D.Fla.1997) (creditor under affirmative duty to release garnishment); In re Timbs, 178 B.R. 989, 996 (Bankr. E.D.Tenn.1994) (punitive damages in the amount of $5,000 imposed against lawyer who failed to take affirmative steps to vacate garnishment proceeding after receipt of notice of bankruptcy filing); Ledford v. Tiedge (In re Sams), 106 B.R. 485, 490 (Bankr.S.D.Ohio 1989) (rejected creditor's argument as absurd that they did not have affirmative duty to vacate process); In re Dungey, 99 B.R. 814, 816-17 (Bankr. S.D.Ohio 1989) (creditor under affirmative duty to release garnishment, damages and attorney's fees awarded to debtor); Mitchell v. Quality Plant Service, Inc. (In re Mitchell), 66 B.R. 73, 75 (Bankr.S.D.Ohio 1986) (rejected creditor's contention that it did not have an affirmative duty to stop garnishment which was effective prior to petition and awarded attorney's fees to debtor); In re Pody, 42 B.R. 570, 574 (Bankr.N.D.Ala.1984) (creditor who would not release garnishment after receipt of notice of bankruptcy filing was in violation of automatic stay and held liable for damages and attorney's fees); Elder v. City of Thomasville, Georgia (In re Elder), 12 B.R. 491, 494 (Bankr.M.D.Ga.1981) (creditor under affirmative duty to stop `downhill snowballing of a continuing garnishment').

The Debtor's resort to a "Motion for Release of Garnishment" in the first instance, without making an attempt to resolve the matter without the Court's intervention is inappropriate for at least four reasons. First, the Debtor's motion asks the Court to order a creditor to do nothing more than that which the law already requires it to do. In other words, the Debtor is asking the Court for what should in almost all cases be a wholly superfluous order. It is expected that creditors will promptly comply with the automatic stay as soon as they receive knowledge of a bankruptcy filing. Second, it undermines the efficacy of the automatic stay to file such motions in a routine, knee-jerk, fashion. The operation of the automatic stay is both broad and powerful. In the vast majority of cases there should be no dispute as to its application. When there is no dispute as to the proper application of the automatic stay, all involved parties should take the necessary action without first seeking the intervention of the bankruptcy court. The power and the efficacy of the automatic stay is undermined when routine and unnecessary motions such as this are made. Third, motions such as this waste scarce judicial resources. Over 7,000 cases were filed in this District alone last year. Many of the debtors who file bankruptcy petitions have had collection suits and garnishment proceedings brought against them. Upon receipt of notice of a bankruptcy filing, creditors should voluntarily and immediately cease all collection efforts and do what is necessary to restore the debtor to the status quo. For example, wages garnished after the date of the filing of a bankruptcy petition should be promptly returned to the debtor without the necessity of a court order. Fourth, motions to release garnishments such as this, when filed on a routine basis, may create a false impression among creditors and employers as to the scope and operation of the automatic stay. Such motions may give the incorrect impression that a creditor is free to continue to violate the automatic stay until such time as a bankruptcy court enters an order specifically directed to the conduct in question. Creditors who take such a position in the future will be subject to sanctions. As the cases cited above make clear, creditors who do not voluntarily take action to comply with the automatic stay may, as a result, pay attorney's fees and damages.

When a garnishment proceeding is pending at the time a bankruptcy petition is filed, the debtor or his counsel should make a reasonable attempt to communicate with the creditor by giving notice of the bankruptcy filing and requesting that action be taken to release the garnishment. The Notice of Commencement of Case which is sent out by the Court is sufficient to do this, however, the delay involved may make it advisable that...