Mark E. Felger and Simon E. Fraser caution parties about the penalties that can be incurred by violating the automatic stay of Section 362 of the bankruptcy code, even in situations where the debtor does not suffer any actual damages, in the Delaware Business Court Insider.
In the case of Healthcare Real Estate Partners v. Summit Healthcare REIT, a debtor was successfully awarded over $600,000 in sanctions to compensate solely for attorneys’ fees incurred against creditors taking offensive action outside the confines of the initial bankruptcy case.
The bankruptcy court’s ruling that attorneys’ fees meet the definition of “damages” under Section 362(k) of the bankruptcy code, means petitioners could face potentially severe punishment for violating the automatic stay even in cases where no actual damages can be shown as a result of their violation. This decision should serve as a warning to all parties of interest in a bankruptcy case, of the serious consequences that can result from a violation of the automatic stay.
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