MEMORANDUM AND ORDER
ALLEN SHARP, Chief Judge.
This case is before the court on appeal from a bankruptcy court decision pursuant to 28 U.S.C. § 158(a).1 In its September 20, 1991 order, the bankruptcy court found Kimco Leasing, Inc. ("Kimco") and Frank A. Webster ("Webster") in contempt of court for violating the permanent injunction of 11 U.S.C. § 524 and awarded attorney fees and costs in the amount of $3,974.50 to Kenneth Paul Knee ("Knee").
The bankruptcy court's findings of facts are not at issue in this appeal. In fact the appellants describe the bankruptcy court's findings of facts as accurate and quote the facts as written by the bankruptcy court. See, Appellants' Brief at 2. As said facts are not disputed, this court adopts them here as quoted below:
Knee was employed by J\'s Steak and Subs (J\'s) as its operations manager. In that capacity he negotiated a lease agreement with Kimco for various pieces of equipment used in the restaurant business. Under the terms of the lease Kimco was to purchase the equipment from a third party and lease it to J\'s for five years. At the end of the five years, J\'s could either return the equipment or exercise its option to purchase the equipment for a nominal sum.
On July 31, 1987, Knee signed the lease, indicating he was signing as operations manager of J\'s. The lease named J\'s as "customer" and "lessee." Debtor\'s Exhibit 34. Neither Knee nor any other party was also referred to on the lease as customer or lessee. Kimco subsequently filed a Uniform Commercial Code financing statement listing the rented equipment as collateral and J\'s as debtor. Kimco Exhibit A.
Knee\'s signature appeared on the lease a second time where he signed as a guarantor in his individual capacity. Edward D. Brader, who is the franchisee of J\'s, also signed as guarantor. Under the terms of the guaranty, Knee and Brader guaranteed lessee\'s rental payments and performance of all the terms of the lease. The guaranty clause also provided that Kimco could proceed directly against the guarantors without first proceeding against the lessee. Debtor\'s Exhibit 34.
After the lease had been in operation for some time, J\'s went out of business and Knee\'s employment was terminated. J\'s retained possession of the equipment although it stopped making rental payments. On March 31, 1989, Kimco filed a Complaint on the Lease Agreement in the Allen Circuit Court, cause number 02C01-8903-CP-242, naming Knee and J\'s as defendants. Kimco, citing J\'s delinquency and pursuant to the lease\'s acceleration clause, demanded full payment of principal, interest, taxes, late charges and costs for a total of $28,384.19 and the immediate return of the leased equipment. Default judgment against Knee and J\'s was entered on May 1, 1989.
On June 6, 1989, Knee filed his Petition for relief under Chapter 7 of the Bankruptcy Code. On his A-3 schedule Knee listed Kimco as an unsecured creditor for $20,183.40 and stated that the claim was disputed. An Order of Discharge was entered on September 21, 1989. Kimco took no action in the bankruptcy court to lift the automatic stay or except its judgment from Knee\'s discharge under 11 U.S.C. § 523.
On June 15, 1990, Kimco filed its first Amended Complaint in its state court action. Paragraph I of the amended complaint incorporated the initial complaint against Knee and J\'s without change. Paragraph II set forth an action for replevin with Kimco asking for possession of the property, and was directed solely against Edward D. Brader. Paragraph III was an action in conversion and named Knee and J\'s as defendants. Under Paragraph III Kimco asked to be awarded the fair market value of the equipment, which it claimed to be $20,000, and, pursuant to Ind. Code § 34-4-30-1, treble damages, costs and fees. Debtor\'s Exhibit 4. Knee filed a Motion for Stay of Proceedings which was granted by the state court on July 24, 1990. Debtor\'s Exhibit 5.
Kimco filed its second Amended Complaint on April 10, 1991. In that complaint Kimco dismissed Knee as defendant on the original count of breach of the lease and added an action in replevin against Mid America Restaurant, Inc., whom Kimco believed had possession of the restaurant equipment. Kimco reiterated its claim for conversion against Knee in the third paragraph, continuing to ask for an award of the fair market value of the equipment and treble damages. Kimco\'s Exhibit C. On May 3, 1991, the state court reaffirmed its earlier order staying the state court action and expressly ordered Kimco and its attorney to cease further prosecution of its claim against Knee in personam. Debtor\'s Exhibit 33.
Knee filed a Motion to Reopen Bankruptcy Proceedings on August 7, 1990, which was granted by this Court on August 14, 1990. On July 23, 1990, Knee filed his Motion for Contempt against Webster, counsel for Kimco, and Kimco. Knee alleged that Kimco and Webster "violated the federal court order . . . which prohibits the collection of discharged debts." Debtor\'s Motion for contempt at 10. Knee asks this Court to find Kimco and Webster in contempt of court and for relief: (1) fine them each $10,000, (2) hold them jointly and severally liable for Knee\'s attorney fees and costs incurred as a result of the state court action, and (3) enjoin them from further contact with or action against Knee. Additionally, Knee asks for a stay of the state court case.
Kimco and Webster have responded in opposition to Knee\'s motions claiming that the state court action is not prohibited by the Bankruptcy Code\'s automatic stay and supporting this claim with the following two arguments. They first argue that Kimco\'s secured status was not affected by Knee\'s bankruptcy proceeding and, therefore, Kimco was entitled to take action to recover its property. Secondly, conversion of the equipment would be a criminal act under Indiana law, which also allows a party injured by a criminal act to bring a civil action to be compensated for its loss. See, I.C. §§ 35-43-4-3 and 34-4-30-1. Since 11 U.S.C. § 362(b)(1) allows the commencement or continuation of a criminal action against a debtor, Kimco\'s civil action, which has a criminal basis, is also allowed.
Based upon these facts, the bankruptcy court charged the appellants with civil contempt and awarded attorney's fees and reasonable costs on September 20, 1991. Then, on October 1, 1991, the appellants asked the bankruptcy court to amend or alter its decision. The bankruptcy court heard oral argument on the motion to reconsider together with a motion from the appellee for further sanctions on January 9, 1992. On January 29, 1992, the bankruptcy court overruled the motion to alter or amend and ordered additional sanctions of $300.00 against appellant Frank Webster.
Kimco and Webster now appeal the finding of contempt based upon the bankruptcy court's conclusion that they violated the post-discharge injunction provisions of § 524(a)(3) of the Bankruptcy Code, 11 U.S.C. § 524(a)(3). Appellants Kimco and Webster filed their notice of appeal on February 4, 1992 and their appellate brief on April 1, 1992. Appellee Knee filed his brief on April 23, 1992, and the appellants filed their reply brief on May 6, 1992.2 An oral argument on the issues was heard on June 3, 1992. Following the hearing, the matters were taken under advisement. The appellants submitted a Statement of Additional Authority on June 5, 1992. The court, having heard argument and being fully briefed on the issues, now AFFIRMS the bankruptcy court.
III. Summary of the Issues Presented
The issues presently before this court on appeal are as follows:
1. Whether the bankruptcy court had jurisdiction over a question of civil contempt posed in response to the filing of a post-discharge lawsuit given the injunction provisions of 11 U.S.C. § 524.
2. Whether the bankruptcy judge committed error in finding that the appellants' acts violated the applicable injunction provisions of 11 U.S.C. § 524.
3. Whether the appellants' acts were sufficient grounds to find the appellants in contempt.
4. Whether the bankruptcy judge erred in imposing sanctions, including Rule 11 sanctions.
The court will address each of these issues in accordance with the standard of review set out next.
IV. The Standard of Review
The standard of review this court must follow when reviewing factual findings of the bankruptcy court is set forth in Bankruptcy Rule 8013 which provides:
On an appeal the district court or bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy judge\'s judgment, order, or decree or remand with instructions for further proceedings. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.
Fed.R.Bk.P. 8013 (1991). While findings of fact are reviewed under the "clearly erroneous" standard, the bankruptcy court's conclusions of law must be reviewed de novo. Woodbridge Place Apartments v. Washington Square Capital, 965 F.2d 1429, 1434 (7th Cir.1992); Oneida Tribe of Indians v. State of Wisconsin, 951 F.2d 757, 760 (7th Cir.1991); Calder v. Camp Grove State Bank, 892 F.2d 629, 631 (7th Cir.1990).3 Applying these standards, the court will now address each of the four issues presented in turn.
V. Jurisdiction of the Bankruptcy Court Over the Question of Civil Contempt
First, the court addresses whether the bankruptcy court had jurisdiction over a question of civil contempt posed in response to the filing of a...
