Bank Letters to Debtor a ‘Willful’ Violation of Stay

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By Diane Davis

First Bank of Puerto Rico can’t send a debtor in bankruptcy monthly letters about her pre-bankruptcy debt without violating the automatic stay, the U.S. Bankruptcy Court for the District of Puerto Rico held March 17 ( Lugo Ruiz v. First Bank of P.R. (In re Lugo Ruiz) , 2017 BL 84630, Bankr. D.P.R., No. 14-02965 (MCF), 3/17/17 ).

After a bankruptcy petition is filed, the automatic stay under Bankruptcy Code Section 362 protects the property of the bankruptcy estate from being dismantled by creditors piecemeal. The automatic stay gives the debtor breathing room to try to make a fresh start.

Some courts, such as the Seventh Circuit, have held that a creditor’s letter sent to debtor’s counsel may not violate the automatic stay. In this case, however, First Bank sent letters directly to debtor Carmen Ruiz, not her counsel, which ran afoul of it, Judge Mildred Caban Flores said.

The bank “willfully violated the automatic stay in effect in this case” because the letters were sent to “collect … or recover a claim against the debtor that arose before the commencement of the case,” the court said.

Once the bank was aware of the filing of the bankruptcy petition and the automatic stay, “any intentional act that results in a violation of the stay is ‘willful,’” and no specific intent to violate the stay is needed, the court said.

The bank argued that the monthly letters stating the total due and the next payment date were sent to inform Ruiz of her rights under the Servicemembers Civil Relief Act.

The court disagreed with the bank, concluding that there was no reason for it to include the amount of the debt and the next due date in the letters other than to pressure payment.

The bank could have made it clear the letters were intended not to collect a debt but to inform her of her legal rights under the law, the court said.

An evidentiary hearing will be needed to determine whether actual damages, attorneys’ fees, and/or punitive damages should be imposed on First Bank, the court said. Almeida & Davila, PSC represented Ruiz; Godreau & Gonzalez Law represented First Bank Corp.; Martinez & Torres Law Offices PSC represented First Bank Puerto Rico; Osmarie Navarro Martinez, Alejandro Oliveras represented Trustee Alejandro Oliveras Rivera; Monsita Lecaroz Arribas represented Office of the U.S. Trustee.

To contact the reporter on this story: Diane Davis in Washington at

To contact the editor responsible for this story: Jay Horowitz at

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