## Facts

- Kenneth G. Butz and Freda M. Butz filed a Chapter 13 petition on April 26, 2010.
- People First Federal Credit Union received notice of the bankruptcy on May 5, 2010.
- On June 14, 2010, after receiving notice, People First mailed Freda Butz a computer-generated “past due” statement sent only when an account was delinquent.
- The statement said the account was “past due,” requested “immediate payment,” stated a specific amount due, and included a detachable remittance section for submitting payment.
- The debtor alleged the mailing was a demand for payment of a prepetition debt in violation of the automatic stay.
- People First admitted sending the statement but claimed it was informational and pointed to internal steps such as coding the account for “no collection activity” and reporting the debt as “included in bankruptcy.”
- The debtor filed an adversary complaint under 11 U.S.C. § 362(k) and later moved for summary judgment on the stay-violation claim.

## Issues

1. Whether mailing a post-petition “past due” statement requesting immediate payment of a prepetition debt constitutes an act to collect, assess, or recover a claim barred by 11 U.S.C. § 362(a)(6).
2. Whether the mailing was a “willful” stay violation under 11 U.S.C. § 362(k) where the creditor had notice of the bankruptcy and the notice was generated by an automated system.

## Decision

- The court granted the debtor’s motion for summary judgment on liability.
- The court held the statement was an act to collect a prepetition debt and violated § 362(a)(6).
- The court held the violation was willful under § 362(k) because the creditor had notice of the bankruptcy and intentionally sent (or allowed its system to send) the statement.
- The court set a further hearing to determine damages.

## Legal Principles

- The automatic stay prohibits acts to collect, assess, or recover prepetition claims against the debtor. 11 U.S.C. § 362(a)(6).
- A stay violation is “willful” under § 362(k) if the creditor had notice of the bankruptcy and intentionally performed the act that violated the stay; specific intent to violate the stay is not required.
- Whether a communication violates § 362(a)(6) turns on its objective character and effect; a billing format requesting immediate payment and providing a remittance coupon is treated as collection activity.
- A creditor’s internal coding or subjective description of a mailing as “informational” does not negate a stay violation when the communication, on its face, demands payment.
- Use of automated systems does not excuse liability; a creditor with notice of bankruptcy must ensure its systems do not send collection communications post-petition.
- Summary judgment is appropriate when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56; Fed. R. Bankr. P. 7056.

## Conclusion

The court held that a post-petition “past due” notice demanding immediate payment of a prepetition debt, sent after the creditor received bankruptcy notice, violated the automatic stay and was willful under § 362(k), warranting summary judgment on liability and a later damages hearing.


In re Butz, 444 B.R. 301 (Bankr. M.D. Pa. 2011)