## Facts

- A debtor filed a voluntary Chapter 7 petition, triggering the automatic stay under 11 U.S.C. § 362(a).
- An unsecured creditor received notice of the bankruptcy shortly after the petition date.
- After the creditor had notice, the creditor’s collection counsel filed a state-court collection action against the debtor.
- The debtor was served with the summons, and the debtor’s attorney repeatedly notified collection counsel of the bankruptcy and demanded that the suit be dismissed or stayed by a specified date.
- When the debtor’s attorney checked with the state court weeks later, the collection action remained active.
- Collection counsel did not dismiss the state action until more than three weeks after receiving notice from the debtor’s attorney.
- The bankruptcy court found a willful automatic-stay violation and imposed $1,000 in joint sanctions on the creditor and collection counsel under 11 U.S.C. § 362(h).
- The district court affirmed; only collection counsel appealed.

## Issues

1. Whether the automatic stay under 11 U.S.C. § 362(a) imposes an affirmative duty on a creditor and its counsel, after learning of the bankruptcy, to promptly discontinue or stay a pending post-petition state collection action.
2. Whether leaving the collection suit pending after notice constitutes a willful violation under § 362(h) supporting monetary sanctions.

## Decision

- The Ninth Circuit affirmed the district court’s order affirming the bankruptcy court.
- The court held that § 362(a) requires creditors and their agents, once they have notice of the bankruptcy, to take affirmative steps to discontinue or suspend collection litigation.
- The court held that maintaining an active post-petition collection action after notice is a continuing, willful stay violation, even if the violator claims it took no further collection steps.
- The court upheld the imposition of sanctions under § 362(h) based on the willful violation.

## Legal Principles

- The automatic stay is self-executing and is intended to stop all collection activity against the debtor upon the bankruptcy filing.
- After receiving notice of the bankruptcy, a creditor and its counsel have an affirmative duty to halt ongoing collection efforts, including promptly dismissing or staying a pending state-court collection action.
- A stay violation is “willful” under § 362(h) when the violator knew of the stay and intentionally acted or failed to act in a manner that violates it; bad faith is not required.
- A mistaken legal view about the stay’s scope does not negate willfulness where the violator had notice and deliberately allowed the prohibited conduct to continue.
- Monetary relief, including fees and costs as actual damages, may be awarded for willful stay violations under § 362(h).

## Conclusion

The Ninth Circuit held that creditors and collection counsel must promptly stop pending collection litigation after learning of a bankruptcy filing; leaving a post-petition collection suit on the docket after notice is a continuing willful violation of the automatic stay that can support sanctions.


Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210 (9th Cir. 2002)