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UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

SOUTHERN DIVISION 

In re JAMES & AMY SCHANG, 

 Bankruptcy Case No. 14-51178 

 Debtors. 

 HON. THOMAS J. TUCKER 

JAMES & AMY SCHANG, 

 

 Appellants / Debtors, 

 Case No. 14-CV-14119 

v. 

 HON. MARK A. GOLDSMITH 

MULLER, MULLER, RICHMOND, 

HARMS & MYERS, P.C., 

 Appellee / Creditor. 

_________________________________/ 

OPINION AND ORDER 

AFFIRMING THE ORDER OF THE BANKRUPTCY COURT DENYING DEBTOR’S 

MOTION FOR SANCTIONS

 

I. INTRODUCTION 

 This is an appeal from an order of the United States Bankruptcy Court for the Eastern 

District of Michigan denying Debtors James and Amy Schang’s motion for sanctions. See 

Notice of Appeal (Dkt. 1); Debtors’ Br. in Support of Appeal (Dkt. 3). Appellee Muller, Muller, 

Richmond, Harms & Myers, P.C. (“Creditor”) filed a response (Dkt. 5), and Debtors did not file 

a reply. Because the Court would not be aided by oral argument, the appeal will be decided 

based on the parties’ briefing. See E.D. Mich. L.R. 7.1(f)(2). For the reasons explained fully 

below, the Court affirms the order of the Bankruptcy Court denying Debtors’ motion for 

sanctions. 

II. BACKGROUND

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The pertinent background is straightforward and seemingly undisputed.1

 On July 6, 

2014, Debtors filed a petition for Chapter 7 bankruptcy, in which they listed a debt to Nu-Way 

Truck Driving Center (“Nu-Way”), as Nu-Way had previously obtained a judgment in a 

Michigan state-court case against Debtors. See Debtors’ Br. at 1 (Dkt. 3). Debtors set forth the 

proper name and address for Nu-Way in the creditor-mailing matrix. Id. On July 7, 2014, the 

official notice of the bankruptcy was mailed, and there were no bypassed recipients or bounced 

mail. Id. 

 On July 9, 2014, on behalf of Nu-Way, Creditor mailed a collection letter to Debtors, 

wherein Creditor sought from Debtors satisfaction of the judgment. Id. On August 6, 2014, 

Creditor sent Debtors a second collection letter with respect to payment of the judgment. Id.; see 

also 8/6/2014 Letter at 11 (cm/ecf page) (Dkt. 1). On August 13, 2014, Debtors filed a motion 

for sanctions against Creditor pursuant to 11 U.S.C. § 362, because Creditor had sent the August 

6, 2014 collection letter to Debtors. See Debtors’ Mot. at 7-9 (cm/ecf pages) (Dkt. 1). 

On September 10, 2014, the Bankruptcy Court held a hearing on Debtors’ motion for 

sanctions, and ultimately denied the motion. See 9/10/2014 Hr’g Tr. at 18 (cm/ecf page) (Dkt. 

1); 9/10/2014 Order at 5 (cm/ecf page) (Dkt. 1). On January 22, 2015, a final decree was entered 

in Debtors’ bankruptcy case, noting that the bankruptcy estate had been administered, and closed 

the case. Debtors now appeal the Bankruptcy Court’s ruling denying their motion for sanctions. 

III. STANDARD OF REVIEW

 In a bankruptcy appeal, the Court reviews the bankruptcy court’s findings of fact under 

the clear-error standard, and its conclusion of law de novo. See B-Line, LLC v. Wingerter (In re 

 

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 Debtors provided the factual background of this case in their brief in support of their appeal 

(Dkt. 3), and there is no indication that Creditor disputes any of these background facts. 

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Wingerter), 594 F.3d 931, 935-936 (6th Cir. 2010). “A finding of fact is clearly erroneous 

when[,] although there is evidence to support it, the reviewing court on the entire evidence is left 

with the definite and firm conviction that a mistake has been committed.” Riverview Trenton 

R.R. Co. v. DSC, Ltd. (In re DSC, Ltd.), 486 F.3d 940, 944 (6th Cir. 2007) (quotation marks 

omitted). 

The Court reviews the bankruptcy court’s decision on whether to impose sanctions under 

the abuse-of-discretion standard. In re Wingerter, 594 F.3d at 936. “An abuse of discretion 

occurs where the reviewing court has a definite and firm conviction that the court below 

committed a clear error of judgment.” Id. (quotation marks omitted). Put another way, “if 

reasonable persons could differ as to the issue, then there is no abuse of discretion.” Id.; see also 

In re Airspect Air, Inc., 385 F.3d 915, 920 (6th Cir. 2004) (“An abuse of discretion occurs when 

the bankruptcy court relies upon clearly erroneous findings of fact, improperly applies the law, or 

uses an erroneous legal standard.”). 

IV. ANALYSIS 

Title 11 U.S.C. § 362 provides, in pertinent part, that the filing of a petition “under 

section 301, 302, or 303 of this title . . . operates as a stay” regarding the following: (i) “the 

commencement or continuation . . . to recover a claim against the debtor that arose before the 

commencement of the case under this title; (ii) “the enforcement, against the debtor or against 

property of the estate, of a judgment obtained before the commencement of the case under this 

title,” and (iii) “any act to collect, assess, or recover a claim against the debtor that arose before 

the commencement of the case under this title[.]” 11 U.S.C. §§ 362(a)(1)-(2), (6). This 

provision provides the debtor with “a breathing spell and stops all collection efforts, all 

harassment, and all foreclosure actions.” Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 423 

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(6th Cir. 2000) (quotation marks omitted). Subsection 362(h) allows a debtor to remedy a 

“willful violation” of an automatic stay. Id.; 11 U.S.C. § 362(h). Importantly, a “willful 

violation of an automatic stay survives dismissal of the case in bankruptcy.” In re Javens, 107 

F.3d 359, 364 n.2 (6th Cir. 1997). 

In this case, Debtors allege that Creditor violated the automatic stay by sending the 

August 6, 2014 collection letter. Debtors then sought sanctions for this violation, which the 

Bankruptcy Court denied. In their appeal, Debtors raise two arguments: (i) the Bankruptcy Court 

abused its discretion by ruling on an issue of credibility without holding an evidentiary hearing, 

and (ii) a creditor has the legal obligation, when it violates a previous automatic stay, to file an 

administrative order to stay the case. See Debtors’ Br. at 2, 9. The Court considers each 

argument in turn. 

A. No Credibility Determination, Debtors’ Failure to Mitigate Damages 

First, Debtors argue that the Bankruptcy Court abused its discretion by ruling on an issue 

of credibility — i.e., the issue of when Creditor received notice of Debtors’ bankruptcy — 

without holding an evidentiary hearing. See Debtors’ Br. at 2. The Court finds no basis for this 

claim. 

During the hearing on Debtors’ motion for sanctions, the Bankruptcy Court explicitly 

stated that it was not making a decision on whether Creditor had received notice of the 

bankruptcy filing prior to sending the August 6, 2014 letter: 

I don’t think I need to resolve that apparent factual dispute, factual 

issue though, in order to resolve the remainder of this motion, and 

the reason for that is because the [D]ebtors failed to make any 

effort after the July 9 letter was received by them from [Creditor], 

to mitigate their damages from the alleged violation of the 

automatic stay. Had they done so, had they taken any effort really, 

minimal effort, they could have, it appears they could have in my 

view prevented the mailing of the August 6th letter entirely. 

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9/10/2014 Hr’g Tr. at 44 (cm/ecf page) (Dkt. 1). Thus, the Bankruptcy Court made no 

determination of credibility regarding notice to Creditor of Debtors’ bankruptcy filing prior to 

August 6, 2014. As the transcript of the hearing makes clear, the Bankruptcy Court simply 

determined that neither Debtors nor their attorney took any steps to contact Creditor regarding 

Debtors’ bankruptcy after Debtors received the July 9, 2014 collection letter. In other words, the 

Bankruptcy Court proceeded to frame the issue as one of whether Debtors mitigated their 

damages, and ultimately found that Debtors failed to do so. In their brief, Debtors contend that 

the Bankruptcy Court “misapplied the doctrine of mitigation of damages.” Debtors’ Br. at 5. 

This Court disagrees with Debtors and finds that case law supports the Bankruptcy Court’s 

decision. 

In order to recover for a stay violation, a debtor must establish that a violation occurred, 

the violation was committed willfully, and the violation caused actual damages. See 11 U.S.C. § 

362(k); see also Archer v. Macomb Cty. Bank, 853 F.2d 497, 499 (6th Cir. 1988). The debtor 

bears the burden of demonstrating, “by at least a preponderance of the evidence, that the 

damages sought were actually suffered.” In re Pawlowicz, 337 B.R. 640, 645-646 (Bankr. N.D. 

Ohio 2005). “A bankruptcy court’s decision with respect to the amount of damages constitutes a 

factual finding, and, under Bankruptcy Rule 8013, [the reviewing court] may not upset such 

findings unless they are clearly erroneous.” Archer, 853 F.2d at 499 (quotation marks omitted). 

Given the frequency in which debtors file motions for contempt and/or for damages 

under section 362(h) for violations of automatic stays, debtors “have an obligation to attempt to 

mitigate damages prior to seeking court intervention.” In re Oksentowicz, 324 B.R. 628, 630 

(Bankr. E.D. Mich. 2005) (collecting cases) (emphasis added); see also In re Jean-Francois, 516 

B.R. 699 (E.D.N.Y. 2014) (“[A] debtor is under a duty to exercise due diligence in protecting 

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and pursuing his or her rights and in mitigating any damages with regard to a creditor’s violation 

of the automatic stay.”). 

In the present case, Debtors admit that no mitigation efforts were attempted after 

receiving the July 9, 2014 collection letter and/or the August 6, 2014 collection letter from 

Creditor. 

THE COURT: Now when the debtors received the July 9 

letter and when the debtors received the 

August 6th letter, and when they first made 

you aware of these letters having been sent, 

did you contact the law firm? 

MR. DERN:2

 I did not. 

THE COURT: Phone call, letter, email - - 

MR. DERN: Nothing. 

9/10/2014 Hr’g Tr. at 31 (cm/ecf page). Rather than making an attempt to contact Creditor 

regarding these letters, Debtors “just jumped into [filing the] motion [for sanctions].” Id. at 32 

(cm/ecf page). In addition, when an attorney from Creditor’s office contacted Debtors’ counsel 

regarding the motion for sanctions, Debtors’ counsel failed to make any attempt to mitigate and, 

instead, pursued the motion for sanctions before and during the September 10, 2014 hearing. See 

Id. at 32-33 (cm/ecf pages). As Debtors acknowledged, they suffered little to no damages: 

THE COURT: All right. Did you do anything else on behalf 

of the debtors to mitigate the debtor’s 

damages from the stay violation? 

MR. DERN: The damages to the debtors is nominal, I 

admit, so there hasn’t been any other 

damages or no reason to mitigate, other than 

we still have the case in Novi that’s still 

open, which I still believe from the Koval 

 

2

 Mr. Dern represented Debtors before the Bankruptcy Court and continues to represent Debtors 

with respect to the instant appeal. 

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opinion that they should have closed this 

case already. 

Id. at 33 (cm/ecf page). 

In their brief, Debtors claim that, “at an absolute minimum[, they] had to pay to get to 

[their] counsel’s law office.” Debtors’ Br. at 8. However, Debtors did not raise this item of 

damage at the hearing on the motion for sanctions. Moreover, where the sole damage to the 

debtors is the cost to litigate an alleged violation of section 362, and Debtors did not attempt to 

resolve the matter prior to filing a motion for sanctions, no recovery is permitted. See, e.g., In re 

Preston, 333 B.R. 346 (Bankr. M.D.N.C. 2005) (denying any damage award to the debtor 

“[b]ecause the only damages the Debtor sustained are those manufactured by the Debtor’s 

counsel, which could have easily been mitigated”) (collecting cases); Shadduck v. Rodolakis, 

221 B.R. 573, 585 (D. Mass. 1998) (“[W]here the only damages to the debtor are the attorneys’ 

fees related to bringing a contempt motion, courts have ruled that such damages are insufficient 

to satisfy the damages element of 11 U.S.C. § 362(h) unless the debtor attempts to resolve the 

dispute with the [creditor] prior to filing a motion for contempt and sanctions.”). 

Therefore, the Court concludes that the Bankruptcy Court did not abuse its discretion by 

denying Debtors’ request for sanctions, and its findings of fact regarding Debtors’ failure to 

mitigate and damages suffered were not clearly erroneous. This Court agrees with the 

Bankruptcy Court that Debtors’ damages (if any) are minimal and relate to the filing of their 

sanctions motion, which could easily have been avoided had Debtors took any action to mitigate 

their damages. 

B. Creditor Was Not Required to Administratively Close State-Court Case 

Second, Debtors argue that a collection law firm or creditor has an affirmative duty to file 

an administrative closing of a state or federal court lawsuit upon receipt of notification of 

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debtor’s bankruptcy filing, even if a judgment was previously obtained. See Debtors’ Br. at 9. 

According to Debtors, “[t]he creditor had to take steps to reassure the debtors that it would take 

no further action to collect the debt as it did when it sent the second letter.” Id. And it is Debtors 

contention that “[t]he only adequate way to reassure the debtors that creditor would not take any 

further action would be for the creditor to file the administrative order staying the state court 

case.” Id. at 12-13. 

Here, it is undisputed that Creditor did not seek an administrative stay in the state-court 

case in which Nu-Way had obtained a judgment against Debtors. But the Bankruptcy Court 

found that such an action was unnecessary, stating that “there is no duty in [its] view created by 

the automatic stay under Section 362(a)(1) or 362(a)[’s] other provisions on the part of a creditor 

who has a judgment in a state court action to take affirmative steps to . . . cause the 

administrative closing of that state court action.” 9/10/2014 Hr’g Tr. at 41 (cm/ecf page). In 

Bankruptcy Court’s opinion, “the duty imposed by the automatic stay is for the creditor to refrain 

from taking any action or effort in that state court lawsuit in that situation to try to enforce or 

collect the judgment that was entered before the bankruptcy was filed.” Id. (emphasis added). 

The Court agrees with the Bankruptcy Court’s ultimate conclusion. 

The Court recognizes that there is authority for the proposition that, in some 

circumstances, a creditor may be required to take an affirmative step to remedy a stay violation 

in order to restore a debtor to the status quo ante. See, e.g., In re Banks, 253 B.R. 25, 31 (Bankr. 

E.D. Mich. 2000) (“A refusal or failure to take action may constitute an act within the scope of 

the automatic stay; thus, an entity which has violated the stay has an obligation to restore the 

status quo by undoing its previous action and preventing the continuation of the consequences of 

the stay violation.”). For instance, in cases cited by Debtors, the stay violation involved a 

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creditor that seized property or garnished the wages of the debtor; therefore, each court ruled that 

the debtor should be returned to the position he or she held prior to the violation of stay. See, 

e.g., In re Meis-Nachtrab, 190 B.R. 302 (Bankr. N.D. Ohio 1995) (failing to return money); In re 

Smith, 170 B.R. 111 (Bankr. N.D. Ohio 1994) (disconnecting phone line); In re Roberts, 175 

B.R. 339 (9th Cir. BAP 1994) (withholding of wages); In re Fry, 122 B.R. 427 (Bankr. N.D. 

Okla. 1990) (failure to return seized mobile home). Nevertheless, Debtors fail to provide any 

authority suggesting that section 362 requires Creditor, in addition to ceasing any and all 

collection activity, to also administratively close the state-court case. 

In this case, there was no garnishment or seizure of money or property. Nor was any 

further action required to put Debtors in the position they were prior to Creditor sending them the 

August 6, 2014 collection letter. As noted above, Debtors have suffered, at most, only nominal 

damages. Moreover, after receipt of the Debtors’ motion for sanctions, Creditor ceased all 

communication with Debtors, as Debtors admitted: 

THE COURT: There were no further letters after the 

August 6th letter? 

MR. DERN: No, sir. 

THE COURT: Right? 

MR. DERN: Right. 

THE COURT: So they have stopped? 

MR. DERN: They have -- I believe they stopped. They 

haven’t received anything. 

9/10/2014 Hr’g Tr. at 33 (cm/ecf page). 

Requiring Creditor to not only cease any collection efforts, but to also file an 

administrative order staying the state-court case, would go above and beyond restoring Debtors 

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“to the position [they] would have been in had the automatic stay been properly observed.” In re 

Briskey, 258 B.R. 473, 480 (Bankr. M.D. Ala. 2001) (“For example, wages seized from a debtor 

after the date the petition should be promptly restored without waiting for an order from the 

bankruptcy court.”). Such a requirement does more than return Debtors to the status quo ante. 

Therefore, the Court concludes that the Bankruptcy Court did not err in ruling that there was no 

legal duty for Creditor to file an administrative stay in the state-court action. 

V. CONCLUSION

 On review, the Court finds no error in the Bankruptcy Court’s ruling and certainly no 

abuse of discretion. For the reasons stated above, the Court affirms the Bankruptcy Court’s 

denial of Debtors’ motion for sanctions. 

 SO ORDERED. 

Dated: May 28, 2015 s/Mark A. Goldsmith 

 Detroit, Michigan MARK A. GOLDSMITH 

 United States District Judge 

 

 

CERTIFICATE OF SERVICE

The undersigned certifies that the foregoing document was served upon counsel of record and 

any unrepresented parties via the Court's ECF System to their respective email or First Class 

U.S. mail addresses disclosed on the Notice of Electronic Filing on May 28, 2015. 

 s/Johnetta M. Curry-Williams 

 Case Manager 

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