Under Section 362(k)(1) of the Bankruptcy Code, “an individual injured by any willful violation of a stay * * * shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.” Some opinions have found that the award of attorneys’ fees under §362(k) is independent from the issue of actual damages. In other words, actual damages must be established before attorneys’ fees are allowed. In Lovett v. Honeywell, Inc., 930 F.2d 625 (8th Cir.1991), for example, the court held that a debtor failed to establish that it had sustained any “actual damages” as a result of a creditor’s alleged violation of the stay, where the only evidence of damages was attorneys’ fees incurred by the debtor in bringing a motion to restrain creditor’s alleged violation of the stay and to hold the creditor in contempt. Such expenses, in the absence of any other damages, were held not to be the type of “actual damages” contemplated by the state provision.[1]
In re Yantis, 553 B.R. 351 (Bankr.N.D.Ind.2016) came to a similar conclusion, possibly, however, for different reasons. Here, the debtor held that the willful violation of the automatic stay occurred when the creditor failed to terminate a garnishment proceeding. In this case, however, the court found that the debtor incurred no actual damages, as everything withheld, and more, was refunded to the debtor. With respect to the request for attorney fees and costs, the court stated that debtors faced with violations of the stay have a duty to mitigate their damages. Id. at 355. The instant debtors failed to do that. “Instead, they did the opposite. Once it became apparent that the garnishment had not been stopped, rather than contacting defendant’s counsel and alerting him to the situation, they hauled off and sued, seeking punitive damages and fees.” Id.
All of this might have been avoided had debtors’ counsel better communicated with creditor’s counsel, instead of taking a “shoot first and ask questions later” approach to the situation. This proceeding should not have been filed as precipitously as it was and may never have been needed at all. As such, any fees and expenses could well have been avoided, were not necessary, and so, should not be recovered.
A different conclusion was reached in In re Fridge, 239 B.R. 182 (Bankr.N.D.Ill.1999). Here, the court held that when parties are threatened with a willful violation of the automatic stay, an attorney must be hired to defend them. The resultant attorneys’ fees incurred are damages to the debtor in every real sense.
Section 362(a) expressly authorizes the award of costs and attorney’s fees as part of the damages to be considered because the statute says that “damages” are “including costs and attorneys’ fees.” Thus, under the plain language reading of the statute, debtor is entitled to an award of attorneys’ fees and expenses incurred in the prosecution of his Motion for Sanctions.
In In re Parker, 634 Fed.Appx. 770 (11th Cir.2015), the debtor brought an action under §362(k) and sought damages for emotional distress. The bankruptcy court granted damages for emotional distress and attorney fees., The district court vacated the compensatory component related to emotional distress. The court ruled that when the debtor simply testified that he was embarrassed and anxious, he failed to establish that he suffered “significant emotional distress.” The district court, however, upheld the award of attorney’s fees. The creditor appealed, arguing that because the debtor suffered no actual damages, he was not entitled to attorney’s fees.
The Eleventh Circuit disagreed. It ruled that §362(k) plainly states that a debtor’s “actual damages[ ] include[e] costs and attorneys’ fees” and that an award of actual damages is mandatory when the stay is violated. Id. at 773. The court explained that the debtor had to file an adverse proceeding to force the creditor to desist from further violating the automatic stay and, thereafter, the creditor litigated in bad faith. Based on a straightforward reading of §362(k), the costs and attorney’s fees that the debtor incurred to halt the violation of the automatic stay and to prosecute his action for damages constitutes an injury. Id.
The court in In re Hood, 2025 WL 3131683 (Bankr.N.D.Miss Nov.7, 2025) came to the same conclusion. It stated that Congress’s use of the words “shall recover” indicated that the legislature intended the award of damages, costs, and attorney’s fees be mandatory. The court further stated that it refused to effectively strike the word “including” from the statute by requiring movant to prove an injury other than attorney’s fees before such fees are recoverable. Id. at *5.
A nuanced approach was followed in Sternberg v. Johnson, 582 F.3d 1114 (9th Cir.2009). Here, the court stated that Congress intended to adopt the “American Rule” regarding the recovery of fees with §362(k). Unlike Britain where counsel fees are regularly awarded to the prevailing party, under the American Rule unless Congress provides otherwise, parties are to bear their own attorney’s fees. Id. at 1121-22. Applying this rule to §362(k), the court stated that the plaintiff cannot recover attorney fees spent to correct a legal injury as part of his damages, even though it could be said he is not made whole as a result. Id. at 1123.
Permitting a debtor to collect attorney fees incurred in prosecuting a damages action would further neither the financial nor the non-financial goals of the automatic stay. With regard to the financial goals, we have explained that “the stay gives the debtor time to put finances back in order, offers the debtor an opportunity to reorganize so that creditors can be satisfied to the greatest extent possible, and prevents creditors from racing to devour the debtor’s estate * * * * .” The stay, then, is meant to help the debtor deal with his bankruptcy for the benefit of himself and his creditors alike. We have never said the stay should aid the debtor in pursuing his creditors, even those creditors who violate the stay. The stay is a shield, not a sword. Id. at 1123-24.
Therefore, the court concluded that fees incurred in an effort to enforce the automatic stay are recoverable as “actual damages,” but that fees incurred in prosecuting a damages action for the stay violation are akin to an ordinary damages action, for which attorney fees are not available under the American Rule.
[1] See also In re Iaello, 231 B.R. 684, 689 (Bankr.N.D.Ill.1999); In re Micro MKTG. Int’l, Inc., 150 B.R. 553, 575 (Bankr.M.D.Pa.1992) (no attorneys’ fees for willful violation because fees were only allowable to embellish actual damages.); In re Henhouse Interstate, Inc., 136 B.R. 220, 223 (Bankr.E.D.Mo.1992); In re Haan, 93 B.R. 439, 441 (Bankr.W.D.N.C.1988) (“Here there is ‘no harm-no foul’ and no injury – no attorneys’ fees.”)
Matthew T. Gensburg
mgensburg@gcklegal.com