Punitive Damages for Violations of Automatic Stay in Bankruptcy §362

Since 2008 I have called out bankruptcy practitioners for their lack of interest in false claims of securitization. The impact on the bankruptcy estate is usually enormous. But without aggressive education of the presiding judge the case will not only go as planned by the banks, it will also lock in the homeowner to “admissions” in bankruptcy schedules and orders that lead to a false conclusion of fact.

Where a pretender lender ignores the automatic stay Bankruptcy judges are and should be very harsh in their penalty. The stay is the bulwark of consumer protection under bankruptcy proceedings which are specifically enabled by the U.S. Constitution. Hence it is as important as free speech, freedom of assembly, freedom of religion and the right to keep and bear arms.

The attached article shown in the link below gives the practitioner a running start on holding the violator responsible and in giving the homeowner a path to punitive damages, given the corrupt nature of the mortgages and foreclosures that arose during the great mortgage meltdown.

This might be the place where a hearing on evidence is conducted as to the true nature of the forecloser and a place where the petitioner/homeowner will be given far greater latitude in discovery to reveal the emptiness behind the presumptions that the foreclosing “party” exists at all or to show that it never acquired the debt but seeks instead to enforce fabricated paper.

Remember that in cases involving securitization claims or which are based upon apparent securitization patterns the named “Trustee” is not the party in interest. The party is the named “Trust.” If the Trust doesn’t exist it doesn’t matter if the Pope is named as the Trustee, there still is no existing party seeking relief from the Court.

see Eviction Can Lead to Sanctions Including Punitive Damages for Violation of Automatic Stay

The challenge here is that most bankruptcy lawyers are not well equipped for litigation. So it is advised that a litigator be introduced into the case to plead and prove the case for sanctions, if the situation arises in which a violation of stay has occurred or if there is an adversary proceeding seeking to prevent the pretender lender from acting on its false claims.

Most of the litigation in bankruptcy court has simply been directed at motions to lift the automatic stay. In such motions, the petitioner is merely saying we want to litigate this in state court. The burden of proof is as light as a puff of smoke. If the court finds any colorable interest in the alleged loan, it will ordinarily grant the motion to lift stay — as it must under the existing rules. Homeowners in bankruptcy find it a virtually impossible uphill climb to defend because they are required to have evidence only in possession of the opposing party who also might not have the information needed to prove the lack of any colorable interest.

But the lifting of the stay applies to the litigation concerning foreclosure. It does not necessarily extend to the eviction or unlawful detainer that occurs afterwards. And where the stay has not been lifted the pretender lender is out of luck because there is no excuse for ignoring the automatic stay.

So further action by the foreclosing party is probably a violation of the automatic stay. And in certain cases the court might apply punitive damages on top of consequential damages, if any. The inability to prove actual damages is relatively unimportant unless the homeowner has such damages. It is the violation of the automatic stay that is paramount.

The article below starts with a premise that the “creditor” has received notice of the BKR and ignored it — sometimes willfully and arrogantly.

Here are some notable quotes from this well-written article by Carlos J. Cuevas.

The imposition of punitive damages for egregious violations of the automatic stay is vital to the function of the consumer bankruptcy system. Most consumer debtors cannot afford to pay their attorneys to prosecute an automatic stay violation. The enforcement of the automatic stay is predicated upon major financial institutions observing the automatic stay.

If there is a doubt as to the applicability of the automatic stay, then a creditor can obtain a comfort order as to the applicability of the automatic stay, or obtain relief from the automatic stay from the Bankruptcy Court.

“Parties may not make their own private determination of the scope of the automatic stay without consequence.”

What would be sufficient to deter one creditor may not even be sufficient to gain notice from another. Punitive damages must be tailored not only based upon the egregiousness of the violation, but also based upon the particular creditor in violation.

In determining whether to impose punitive damages under Bankruptcy Code Section 362(k), several bankruptcy courts have identified five factors to guide their decision. They are the nature of the creditor’s conduct, the creditor’s ability to pay, the motives of the creditor, any provocation by the debtor, and the creditor’s level of sophistication: In re Jean-Francois, 532 B.R. 449, 459 (Bankr. E.D.N.Y. 2015).

The fact that Church Avenue pursued the eviction more than a week after it learned of the debtor’s bankruptcy suggests that Church Avenue either made its own—incorrect—legal conclusion with respect to whether the eviction would be a stay violation, or decided that moving ahead to empty the building quickly and evict the occupants was worth more to it than the risk associated with defending a future § 362(k) motion.

when a creditor acts in arrogant defiance of the automatic stay it is circumventing the authority of the bankruptcy judge to exercise authority over that particular bankruptcy case. A bankruptcy judge is the only entity vested with the authority to determine whether the automatic stay should be lifted.

Egregious violations of the automatic stay can be deleterious to a consumer bankruptcy debtor. For example, a creditor who refuses to return a repossessed vehicle after the commencement of a bankruptcy case can create a significant hardship for a consumer debtor. A debtor whose vehicle has been repossessed may not be able to rent a substitute vehicle. This can create a significant hardship for a debtor who has to commute to work, who has to transport a child to school, or who is a caregiver for a sick relative.

How to Choose a Forensic Report

If you stick to an objective statement of facts without presumptions, anyone can report and testify with credibility if they have backup. Once you cross the line into opinions the report is undermined as to bias, credibility and lack of foundation. Even if it is admitted into evidence the report will be given zero weight in deciding the case.

You undermine your defense if you are relying upon presumptions instead of actual facts or the absence of actual facts. Most presumptions used by homeowners are not persuasive.


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About Neil F Garfield, M.B.A., J.D.


Starting with the tidal wave of foreclosures that hit our shores in 2007-present, a cottage industry emerged to help homeowners contest or negotiate with the pretender lender. Some were better than others. Many were at best a good faith failed attempt at understanding the claimed process of securitization, whose hallmark is complexity and obscurity.  In the words of an executive VP at Deutsch Bank, “it is all very counterintuitive.”

The job of the forensic reporter is to break down the facts so that the defense narrative is understandable and believable. Note that in most cases the defense narrative is going to rely on the absence of facts that should be present if the claims for foreclosure were based in fact. The object should be the production of a report that actually provides traction to the defense and not merely justification for the fee received.

  • RULE #1: If the report sticks to the facts and has an adequate presentation it can serve two purposes, to wit: (a) it provides a checklist of issues for an attorney or pro se litigant to know “what is on the menu” of potential defenses and (b) it might serve as evidence or corroboration of narratives pursued in court in creating and compelling discovery, filing and arguing motions and raising well timed objections at trial. If the preparer did fact checking and investigation, it is permissible to describe inconsistencies in the available evidence that need to be reconciled.
  • RULE #2: Anyone can write a report but few people can satisfy the burden of persuasion in court. Just because something is accepted into evidence or even admitted does not mean that it will be given any weight in the final decision. So if you are going to hire someone to review, investigate and report, that person should have a credible level of knowledge and access to data. Someone who has been through a foreclosure is neither credible nor lacking in credibility, but the other side will no doubt argue that the person had a bias against the banks. Certifications are not a substitute for experience. The greater the credentials the higher the credibility.
  • RULE #3: You are starting with bias against the homeowner. So you must focus on what will persuade the trier of fact (a judge in most cases) to rule in favor of the homeowner. To be persuasive means that the facts are presented without hypotheticals or conclusions that should be made by the judge. The presentation must gradually educate the judge as to how specifically in this case, the foreclosing party should not be allowed to continue. You don’t win by pointing out inconsistencies. You win by showing that the inconsistencies cannot be resolved even with the “help” of the robo-witness at trial.
  • RULE #4: “Everybody knows” is not a defense. If there is information available that might assist in showing that the documents are self-serving, then that might be the the jump-off point for undermining the credibility of the witness and the exhibit, but it needs to be much stronger to exclude the evidence altogether. If the foreclosing party has been the target of investigations, charges and settlement agreements based upon fabrication of documents, forgery and robosigning, that could be the jump-off point to argue that the foreclosing party must present its evidence without benefit of a legal presumption.
  • RULE #5: Wording is critically important. Describing the transaction as a loan or as an assignment basically admits that the description fits. At that point you might just as well pack up and go home. The forensic report should describe documents that have a title, and and then describe the contents and any inconsistencies or disparities. But calling the document an assignment or admitting that the loan was transferred, at least implies that there was a sale of the debt. If you check the documentation you will never see anything that refers to the sale of debt, because there was no sale of the debt.
  • RULE #6: Identify the salient points of the report in a memorandum in support of discovery or motions specifically citing to the page and position of the facts revealed in the report. If the report is for internal use only, attorney work-product etc., the use of bullet points in the report is preferable. Anything that takes less time of the attorney will save time and money. Thus if you want to assert forgery of a document the examiner would state that the signature on Document A appears to be inconsistent with the same person’s signature on Document B. THEN bring in a forensic document examiner who can give an opinion as to whether it is a forgery, back it up with demonstrative exhibits. AND remember, just because there isa  forged document doesn’t mean you win and they lose. You must persuasively argue that the forgery defeats their action.
  • RULE #7: CITATION TO CASE LAW IS LEGAL ARGUMENT — not a forensic report. But the presentation could report that as part of the instructions to the examiner, it has been assumed that X v Y case and Statute § ABC has been used as a reference point.

Here at livinglies and LENDINGLIES we are on our 12th iteration of a forensic report  for homeowners or their counsel. We call it the TERA for Title and Encumbrance Report and Analysis. It is the result of review and research by paralegals who are given instruction by me usually after I get together with the client in a short or long CONSULT.

I have long said that homeowners should stick with people who have or held licenses in professions that might affect the case. And while some people may have a professional license in a relevant field you should not make the mistake, based upon this article, of limiting the scope of work performed by them, just as you should not over-broaden the scope.

After many years of doing unrelenting research and investigation there are many people who have valuable insights that should be shared with the client. So if the forensic examiner says he notices a certain pattern of facts and that this same pattern was used in another case where the homeowner won, you should be listening even though the conclusion might be outside of his report and outside of his/her area of expertise. Note that the same fact pattern is often treated differently by different courts or even the same court.

In the TERA that we currently produce, our mission is to set forth the following elements:

  1. Sufficient information to assist the homeowner (or homeowner’s counsel) in deciding whether to fight, and if so, the toward what end.
  2. Identify the factual discrepancies.
  3. Identify areas for further investigation for discovery.
  4. Identify elements that support demands for discovery.
  5. Answer specifically worded questions posed by existing counsel or me.*
  6. Provide copies of all relevant documents as exhibits to the report.
  7. Identify subject for which a Case Analysis might be of assistance as in developing the specific narrative, strategies or tactics to pursue in the case and what to avoid.

In all cases we defer to local counsel. But with the right support and and guidance most attorneys develop specific knowledge and skills to win these cases. You don’t hear about all the cases won by homeowners because the banks pay for silence in the form of confidentiality agreements.

* EXAMPLE: It is wrong to phrase the question “Does US Bank have standing?” That calls for a legal conclusion that only the court can do. The question is better phrased “What factual evidence has been produced to support the assertion that US Bank has an interest in the subject loan?”




Homeowners Sue SPS in Class Action Over Failure to Mitigate

Thousands of cases like this one have pointed out that SPS and other servicers like Ocwen do not consult with any investor, do not evaluate the case for settlement, modification or mitigation. The answer to questions arising from the unwillingness of those companies to comply with law stems from the fact that the  vast majority of their income comes from undisclosed third parties (the TBTF Banks).

TBTF Banks (BofA, Chase, Wells Fargo, Citi, etc.) do not want settlements or modifications or anything that will make the loan start performing. Subservicers like SPS and Ocwen are used as conduits to other conduits that provides window dressing for claims of compliance or efforts to comply.

Contrary to common sense nobody wants a settlement or modification. The players would rather have the value of the alleged loan reduced to zero or less in the case of foreclosures requiring the bank to maintain the property without any hope of selling it. Common sense says that faced with a value of ZERO versus a value of $200,000, for example, any normal business would select the obvious —- $200,000.

The most extreme cases are where the modification is deemed approved and a new servicer comes in to dishonor it and forecloses, even though the homeowner made the trial payments. Yet Petitions to Enforce the modification agreement are rare; but when they are filed they are usually successful. And in many of those cases the modification is modified for a greater principal reduction than was originally offered.


FREE RESEARCH: Go to our home page and enter subject in search bar.

GO TO LENDINGLIES to order forms and services. Our forensic report is called “TERA“— “Title and Encumbrance Report and Analysis.” I personally review each of them for edits and comments before they are released.

Let us help you plan and draft your answers, affirmative defenses, discovery requests and defense narrative:

954-451-1230 or 202-838-6345. Ask for a Consult.

REGISTRATION FORM: You will make things a lot easier on us and yourself if you fill out the registration form. It’s free without any obligation. No advertisements, no restrictions. The consult is important to determine how we may be of assistance in the drafting and filing of documents in court or complaints directed to law enforcement.

Purchase audio seminar now — Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations.



Whether or not the class gets certified or settled the suit brings up certain salient points which again give rise to the most common question of all, to wit: “Why is that?”

The answer is hiding in plain sight: None of these parties represent a creditor or owner of the debt . All of them represent undisclosed third parties who are making money hand over fist in the shadow banking market. A completed foreclosure represents the first and only valid legal document in their long train of lies promulgated by piles of fabricated, forged, robo-signed paper. The justice system isn’t always right but it is always final. That is the game the banks are playing.

If SPS or Ocwen actually was set up to help homeowners avoid foreclosure and preserve the value of the loan receivable they would lose virtually all their business. A performing loan would change the makeup of the pools that the players claim to have created. All the re-sales of the same loan would be based upon a loan, even if it existed at one time, that doesn’t exist presently.

So the players NEED that foreclosure not for investors or a trust that doesn’t exist, but for themselves because most of the proceeds of the re-sales of the same loan went the TBTF Banks. They want to preserve their ill-gotten gains rather than do anything that could possibly benefit investors. And the best way they can do that is with an Order or Judgment signed by a duly authorized judge in a court of competent jurisdiction — not with a modification.

Practice Hint: If you see a case that has been ongoing for 8-10 years that is a strong indicator that the investors have received a settlement and no loner have any claim for payment and/or that the “Master Servicer” is continuing to allow payments to investors out of a pool of investor money — i.e., a Ponzi scheme. Those continuing payments have been inappropriately named “servicer advances.” They are not “advances” because it is merely return of investor capital. And since the payments come from an investor pool of cash the payments are not from the servicer since the money came from the same or other investors.

They are called servicer advances because using that name fictitiously allows the “Master Servicer’ (actually the underwriter of the certificates) to claim a “recovery” of “servicer advances.” The recovery is ONLY allowed after sale of the property after a foreclosure where the buyer is a BFP.

So for example if payments to investors attributed to the subject loan are $2,000 per month, 10 years worth of “servicer advances” results in a “recovery claim” of $240,000. Generally that is enough to wipe out any equity. The investors get nothing. The foreclosure was actually for the sole interest and benefit of the banks, not the investors. And the homeowner again finds himself used as a pawn for others to make money over the rotting carcass of what was once his home.

Hence the trial strategy suggested would be drilling down on whether the trust is receiving payment from a “third party,” whether that party has rights of subrogation or is satisfied by some other fee or revenue. If you get anywhere near this issue the bank will fold up like a used tent. They will pay for confidentiality.

The Role of Dynamic Dark Pools in Ponzi Schemes Masquerading as Securitized Loan Pools

The bottom line is that there are no financial transactions in today’s securitization schemes. There is only fabricated paper. If you don’t understand the DDP, you don’t understand “securitization fail,” a term coined by Adam Levitin.


GO TO LENDINGLIES to order forms and services. Our forensic report is called “TERA“— “Title and Encumbrance Report and Analysis.” I personally review each of them for edits and comments before they are released.

Let us help you plan your answers, affirmative defenses, discovery requests and defense narrative:

954-451-1230 or 202-838-6345. Ask for a Consult. You will make things a lot easier on us and yourself if you fill out the registration form. It’s free without any obligation. No advertisements, no restrictions.

Purchase audio seminar now — Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations.



I received a short question today to which I gave a long answer. The question is “What happens when an investor decides that he or she wants to cash it in does someone redeem their certificate ?”

Here is my answer:

YES they get paid, most of the time. It is masked as a “trade” on the proprietary trading desk of the CMO Dept. which is completely unregulated and reports nothing. As long as the Ponzi scheme is going strong, the underwriter issues money from the investor pool of money (dynamic dark pool -DDP). It looks like a third party bought the “investment.” If the scheme collapses then the underwriter reports to investors that the market is frozen and there are no buyers.

There is no redemption because there are no certificates. They are all digital entries on a server. Since the 1998 law deregulated the certificates, reporting is limited or nonexistent. The entries can be changed, erased, altered, amended or modified at will without any regulator or third party knowing. There is no paper trail. Thus the underwriter will say, if they were ever asked, whatever suits them and there is no way for anyone to confirm or rebut that. BUT in discovery, the investors have standing to ask to see the records of such transactions. That is when the underwriter settles for several hundred million or more.
They discount the settlement based upon “market” values and by settling for pennies on the dollar with small community banks who do not have resources to fight. Thus if they received $2 billion for a particular “securitized pool” that is allocated to a named trust they will instantly make about 10-20 times the normal underwriting fee by merely taking money before or after the money hits the DDP. Money is paid to the investors as long as sales of certificates are robust. Hence the DDP is constantly receiving and disbursing money from many more sources than a fixed group of homeowners or investors.
It is all about gaps and absences. If a debt was properly securitized, the investor would pay money to the underwriter in exchange for ownership of a certificate. The money would then be subject to fees paid to the underwriter and sellers of the certificates. The balance would be paid into a trust account on which the signatory would be a trust officer of the Trustee bank.
If a scheme is played, then the money does not go into the trust. It goes to the DDP. From there the money is funneled through conduits to the closing table with the homeowner. By depositing the exact and expected amount of money into the trust account of the closing agent, neither the closing agent nor the homeowner understands that they are being played. They don’t even have enough information to arouse suspicion so that they can ask questions.
Hence if you combine the proper securitization scheme with the improper one you see that the money is diverted from the so-called plan. This in turn causes the participants to fabricate documents if there is litigation. They MUST fabricate documents because if they produced real documents they would have civil and criminal liability for theft, embezzlement in investor litigation and fraud and perjury in foreclosure litigation.
It is only by forcing a peek around the multiple layers of curtains fabricated by the players that you can reveal the absence of ownership, authority or even an economic interest — other than the loss of continued revenue from servicing and resales of the same loan through multiple investment vehicles whose value is completely derived from the presumed existence of a party who is the obligee of the debt (owner of the debt, or creditor).
That party is the DDP — fund that is partially authorized for “reserve” and which the prospectus and trust instrument (PSA) state (1) that the mortgage loan schedule is not the real one and is presented as an example and (2) that the investors acknowledge that they might be paid from their own money from the “reserve.”
The gap is that the DDP and the reserve are two different accounts. The “reserve” is a pool of money held in trust by, for example, U.S. Bank as trustee for the trust. There is no such account. The DDP is controlled by the underwriter but ownership is intentionally obscured to avoid or evade detection and the liability that would attach if the truth were revealed.
We win cases not by proving theft from investors but by hammering on the fact that the documents are fabricated, which is true in virtually all cases involving a named trust. We will win a large award if we can show that the intended beneficiaries of the foreclosure were parties other than the obligee on the debt.
Thus the attorneys, servicers and trustee are protecting their ill-gotten gains and seeking to grab more money and property at the expense of the unnamed investors and homeowners. They are then transforming an expected revenue stream into the illusion of a secured debt owed not to the funding sources but to the intermediaries.
Go to LENDINGLIES for more help.

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