Bankruptcy Leads To Emotional Distress Award

Bankruptcy Lawyer Bryan W. Stone answers the question: “What are North Carolina’s exemptions?”


When you think of emotional distress claims, you understandably think of them in a personal injury context. The term is almost always associated with car accidents or workplace injures, something where someone also suffers physical harmed. Though it’s true that emotional distress exists primarily in the personal injury world, a recent case decided by the U.S. Court of Appeals for the Third Circuit demonstrates that emotional distress can sometimes involve bankruptcy proceedings.


Knocking-on-a-door-Charlotte-Bankruptcy-Lawyer-300x225The case at issue concerns a couple, Garth and Deborah Lansaw, and their former landlord, Frank Zokaites. Way back in 2006, the Lansaws were experiencing some financial trouble. The two ran a daycare and Zokaites used to rent them space. The financial trouble meant that they ended up owing money to Zokaites even after moving on to a new space with a different landlord. Zokaites discovered that they’d left and rented out additional space from a new landlord and was apparently infuriated.


After learning of the new lease, Zokaites had a lien issued against their personal property for the amount of unpaid rent he was owed. The day after serving the Lansaws with the lien, they decided to file for bankruptcy, finally pushed to the brink. As anyone who has read about the bankruptcy process knows, this act, the filing, is an important one because it results in an automatic stay. The automatic stay exists to give the debtors some breathing room, preventing creditors from pursuing them for amounts owed until the bankruptcy court has a chance to weigh in.


The automatic stay wasn’t enough to keep Zokaites away. In fact, he aggressively pursued the money he believed he was owed. On one occasion, Zokaites entered the daycare during business hours and took photos of their personal property. He then walked into Deborah’s office and backed her up against a wall while yelling at her. On another day, Zokaites showed up at the daycare and chained the front doors shut. The Lansaws had the chains removed and then slept in the building overnight trying to prevent a repeat occurrence. They weren’t successful, as Zokaites took the keys they had left in the front door, locking them inside. On yet another occasion, Zokaites had his lawyer send a letter (and make repeated calls) to their new landlord, demanding that he terminate their lease.


The aggressive collection efforts took a toll on the Lansaws who say they suffered emotional distress as a result. Deborah had trouble sleeping and woke up with nightmares. Garth became less social, withdrawing out of fear of encountering Zokaites. The two claimed that Zokaites’ decision to violate the automatic stay led to real harm to them psychologically and were thus entitled to compensation as a result.


Zokaites, unsurprisingly, disagreed. He argued that they should have to prove that they’d suffered emotional harm, by submitting medical records or the testimony of a counselor. Without that proof, he believed he did not owe any compensation for emotional distress simply for violating the automatic stay.


Fortunately for the Lansaws, a bankruptcy court disagreed. The court decided that they were owed $10,000 for emotional distress and another $40,000 for punitive damages due to the violation of the bankruptcy law. The case was appealed and the Third Circuit affirmed. Experts have said that the case represents an especially egregious violation of the automatic stay and deserved harsh punishment. The hope is that this case serves as an example to others of what can happen to creditors who fail to respect the stay and continue harassing debtors who have already filed for bankruptcy protection.


If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.





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