Flynn v. IRS (In re Flynn)

169 B.R. 1007 (Bankr. S.D. Ga. 1994)

 

RULE:

Section 362(a) of the Bankruptcy Code imposes an "automatic stay" upon the filing of a petition in bankruptcy, which prohibits, among other things, any act to obtain possession of estate property or to collect, assess, or recover a claim against a debtor that arose before the commencement of the debtor's bankruptcy case. 11 U.S.C. §§ 362(a)(3) and (a)(6), is the court's enforcement mechanism to protect a debtor from creditors who willfully violate the stay.

FACTS:

Appellee Penny Flynn filed a Chapter 13 petition for relief with the Bankruptcy Court on April 17, 1992. At that time, appellee was divorced from her husband and providing support to their two minor sons. During the marriage, appellee and her husband were filing joint tax returns. According to appellee, her husband was under-reporting his income which led to the assessment of additional taxes and to a significant portion of the debt owed to the Internal Revenue Service ("IRS") set out in her bankruptcy petition. The IRS received timely notice of plaintiff's bankruptcy case and filed two proof of claims on August 26, 1992. These claims were provided for in the Debtor's Plan confirmed on November 19, 1992.

ISSUE:

Did the IRS willfully violate the automatic stay thereby entitling appellee to compensatory damages, costs and attorney's fees under 11 U.S.C. § 362(h)?

ANSWER:

Yes.

CONCLUSION:

Even if the issue of whether a willful violation occurred under § 362(h) were properly before this Court, the Court would find that such a willful violation occurred in this case. A violation of an automatic stay under § 362(h) is willful if the defendant knew of the automatic stay and the defendant's actions violating the stay were intentional. Specific intent to violate the automatic stay is not required. In re Clarkson, 168 B.R. 93, 94 (Bankr.D.S.C.1994). In this case, the IRS received notice of plaintiff's bankruptcy case and filed two proof of claims in the case. Its action in sending the notice of levy to appellee's bank was certainly intentional. Therefore, the violation was willful.

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