Bankruptcy

Spookiest Bankruptcy Opinion of 2009

By Katie Porter

It's Halloween, and time for nominations for the Spookiest Bankruptcy Opinion of the Year. Comments are open. Name the opinion that gives you goosebumps, and explain why others should be scared . . . very, very scared.

My own nomination is Sternberg v. Johnston, ___F. 3d. ___, 2009 WL 3381162 (9th Cir. Oct. 22, 2009). This gem not only creates a Circuit Split (always scary to invite the Supreme Court into bankruptcy jurisprudence), but will harm both creditors and debtors. Why? Because the opinion will deter debtors and their attorneys from pursuing creditors who commit willful violations of the automatic stay. This is frightening because the stay is so key to the collective nature of bankruptcy; the stay protects both debtors and creditors and ensures an orderly bankruptcy process. The words of the stay won't have much teeth if nobody sues for damages in willful violations. Sternberg will dramatically reduce the enforcement of the automatic stay because it holds that attorney fees for pursuing a damage award for a willful stay violation may not be recovered as "actual damages" under 362(k)(1). A law without enforcement . . . that's a ghost that won't scare anyone.

Full post as published by Credit Slips on October 30, 2009 (boomark / email).