Prospective bankruptcy filers are often tempted to forgo dedicated legal representation and attempt to manage the process on their own, or hire a cut-rate “bankruptcy mill” that specializes in high volume and extra-low fees. The desire to cut costs here is understandable: for someone in financial trouble it can be difficult to envision paying a lot of money for an attorney, and filing bankruptcy can appear simple at first glance to a layperson reading about it online. But appearances can be deceiving. The bankruptcy process can be surprisingly long and drawn out, and dealing with recalcitrant creditors can be confusing and very stressful. What may initially seem like a straightforward bankruptcy can turn out to be a complicated and strongly contested legal dispute. A recent case that we successfully argued before the United States Court of Appeals for the Ninth Circuit vividly illustrates the importance of having an attorney who knows your rights and will fight for them in the face of creditor misconduct.
Snowden v. Check Into Cash of Washington, Inc. (In re Snowden, 769 F.3d 651 (9th Cir. 2014))
The automatic stay is a cornerstone of the federal bankruptcy system and one of the most important protections the law gives to bankruptcy filers. When a debtor files for bankruptcy, the automatic stay instantly stops all creditors from attempting to collect any debts held by the filer. This includes phone calls, threatening letters, cashing checks held by the debtor, and any other collection activities. The automatic stay can be a literal lifesaver for someone who’s besieged by rude, aggressive debt collectors. Clients often tell us of the overwhelming sense of relief they feel knowing that they don’t have to be afraid to answer the phone or open the mail anymore. When a creditor violates the automatic stay, though, that relief goes away, and the nightmare of dealing with creditors returns. That’s a serious matter, and the courts take it very seriously. But it can take a lot more than simply notifying the court to ensure that your rights are protected. As we learned arguing the Snowden case, it can take a lot of time, effort, and legal expertise to bring a misbehaving creditor to justice and win a debtor the relief to which she is entitled.
In November of 2008, Ms. Snowden obtained a $500.00 payday loan from Check Into Cash, a national chain of payday lending outlets. Like many people, Snowden ran into financial difficulties after missing some work due to an injury, and informed Check Into Cash that she was contemplating having to file bankruptcy and might not be able to repay the loan.
Snowden filed for bankruptcy in January 2009. About a month later, Check Into Cash initiated an electronic funds transfer to recover the outstanding loan from Snowden’s bank account. The unexpected transfer caused Snowden’s account to be overdrawn, which in turn resulted in several hundred dollars’ worth of overdraft and returned item fees. In total, the withdrawal and subsequent charges cost Snowden more than $800.
In April of 2009, as attorneys for Snowden, we filed a motion in Bankruptcy Court requesting sanctions against Check Into Cash. Snowden requested the return of the original sum plus the overdraft fees, punitive damages, emotional distress damages, and attorneys’ fees. In the subsequent trial, the Bankruptcy Court awarded $27,483.55 to Snowden, an amount that included $12,000 for emotional distress damages and $12,000 in punitive damages, in addition to loan and bank fee reimbursement and attorneys’ fees. After several appeals the case was heard by the Ninth Circuit Court of Appeals. Despite Check Into Cash’s ongoing insistence that the punitive and emotional distress damages awarded by the prior court were not justified the Ninth Circuit Court of Appeals upheld all damages awarded to Snowden.
What Does This Case Mean For You?
In the Snowden case, Check Into Cash fought hard to avoid paying punitive and emotional distress damage, which resulted in us spending many hours of effort on our client’s behalf both in and out of court on this matter. Without effective legal representation, a lone bankruptcy filer would have no hope of obtaining relief in a case like this. Fortunately, we were able to recover significant compensation for the distress and trouble our client went through, and because the bankruptcy code provides for the recovery of attorneys’ fees incurred in stopping and fixing automatic stay violations, our client did not have to see that award get swallowed up by her own legal bills.
From the point of view of a debtor contemplating filing for bankruptcy, this case shows that high quality legal representation is imperative for effective handling of a bankruptcy case. We believe that it is imperative that debtors understand their rights and be empowered to hold creditors who violate those rights accountable. It takes a thorough understanding of the bankruptcy code and its many nuances to recognize when a creditor is not playing by the rules and see that justice is done.