Collecting on Contempt – Contempt Order for Violation of Stay is Sanctions order, not mere Money Judgement

In the 2013 case of In re Wallace, the Bankruptcy Appellate Panel for the Ninth Circuit Court of Appeals held that a contempt order for violation of automatic stay entered by the Bankruptcy Court constituted a sanctions order to be paid within a set period of time. Further, the court determined that even if the sanction order was considered a money judgement, which would be only enforceable through a writ of execution, “the contempt power to enforce a sanction for misconduct was appropriate because it is not an ordinary money judgment.”

In that case, the Bankruptcy Court entered a conditional stay relief order that directed any recovery against the debtor be limited to the extent of proceeds from debtor’s commercial general liability insurance policy and/or surety bond. The creditors ignored the order and filed a complaint against the debtor individually for special and punitive damages (nowhere naming the insurance policy or other required conditions from the relief order).

The Bankruptcy Court granted the debtor’s sanction motion, which creditors subsequently failed to pay. The creditors contended that the language of the original sanctions order was ambiguous since its text suggested it was a Judgement, while also setting a 60 day period in which to pay. The Bankruptcy Court responded that while the language was ambiguous, the whole point of the order was to sanction the creditors for violating the discharge injunction. Thus, the Bankruptcy Court found it was a contempt order, not merely a judgment enforceable by execution.

BAP affirmed, since (1) the definition of “judgment” within the Rule is “any appealable order” and, thus, in no way transforms the sanction order into a money judgement; (2) Appellants never objected and never sought clarification from the bankruptcy court regarding the supposed discrepancy.

KEYWORDS: discharge order, violation of discharge order, contempt of discharge injunction, civil contempt, sanctions order, money judgement, collecting on contempt

Read Related Posts: