               United States Bankruptcy Appellate Panel
                           FOR THE EIGHTH CIRCUIT
                                _______________

                                     No. 08-6047
                                  ________________

In re:                                     *
                                           *
Terri Kae Krivohlavek,                     *
                                           *
         Debtor.                           *
                                           *
Terri Kae Krivohlavek,                     *
                                           * Appeal from the United States
         Debtor - Appellant,               * Bankruptcy Court for the District of
                                           * Nebraska
               v.                          *
                                           *
Boys Town Federal Credit Union,            *
                                           *
         Creditor - Appellee.              *
                                         _____

                                Submitted: April 29, 2009
                                  Filed: May 22, 2009
                                         _____

Before KRESSEL, Chief Judge, SCHERMER, and VENTERS, Bankruptcy
Judges.
                                 _____

VENTERS, Bankruptcy Judge.

       This is an appeal of the bankruptcy court's order denying the Debtor's motion
for turnover and for sanctions against creditor Boys Town Federal Credit Union for
alleged violations of the automatic stay. For the reasons set forth below, the
bankruptcy court's order is reversed and this case is remanded to the bankruptcy court
for the determination and imposition of appropriate sanctions against the Credit
Union.

                           I. STANDARD OF REVIEW
        A bankruptcy court’s decision to impose or, in this case, deny, sanctions is
reviewed for a clear abuse of discretion.1 “An abuse of discretion occurs if the court
bases its ruling on an erroneous view of the law or on a clearly erroneous assessment
of the evidence.”2

                              II. BACKGROUND
       The Debtor, Terri Kae Krivohlavek, filed her Chapter 7 bankruptcy petition on
June 26, 2007. The Statement of Intentions filed with her petition stated that she
intended to surrender a 2002 Ford Windstar (“Vehicle”), which was collateral for a
loan (“Loan”) owed to Boys Town Federal Credit Union.

      Prior to the petition date, the Debtor had paid the Loan by way of an automatic
payroll deduction through her employment at Boys Town Research Hospital. The
precise mechanics by which this was accomplished are critical to the resolution of this
appeal. Twice a month, Boys Town Research Hospital deducted $267.98 from her
paycheck and deposited that amount into the Debtor’s savings account at the Credit
Union. The Credit Union then transferred, applied, or directed $187.98 of the $267.98
toward payment of the Loan.3


      1
       American Residential Mortgage, LP v. Thayer (In re Thayer), 384 B.R.
546, 550 (B.A.P. 8th Cir. 2008).
      2
       PW Enter., Inc. v. Kaler (In re Racing Servs., Inc.), 332 B.R. 581, 584
(B.A.P. 8th Cir. 2005).
      3
         Of the remainder, $30 went into a “Christmas” account and $50 remained
in the savings account (or was directed to a different savings account – the
evidence on this point was unclear).
                                          2
       The Debtor alleges that, in addition to notifying the Credit Union of her
bankruptcy filing through the creditor matrix, she notified the Credit Union shortly
after the petition date by phone and in writing that she wanted the automatic
deductions to stop and that she was surrendering the Vehicle. The Credit Union
maintains that it did not have the ability to stop the automatic payment of her loan and
that the only way to do so was for the Debtor to obtain a form from her employer, sign
it, and then submit it to the Credit Union.

       The bankruptcy court did not make any findings as to whether the Debtor
actually notified the Credit Union that she had surrendered the Vehicle or that she
wanted the automatic payroll deductions to stop. However, the Debtor eventually
submitted the proper form on September 18, and the last automatic payroll deduction
occurred on October 5, 2007. In total, after the petition date $1,875.86 was deducted
from Debtor’s paycheck and deposited in the Debtor’s savings account. Of that
amount, $1,315.86 was applied to the Loan.4

       The Debtor received her discharge and the case was closed on October 5, 2007.
On June 25, 2008, the Debtor requested that the case be reopened for the purpose of
filing the underlying motion for turnover and for sanctions. The bankruptcy court
reopened the case on August 18, 2008, and held a hearing on the Debtor’s motion for
turnover and for sanctions on October 10, 2008. The bankruptcy court entered an
order denying the Debtor’s motion on October 22, 2008, and the Debtor timely
appealed.




      4
        The Debtor’s motion for turnover and sanctions sought turnover of only
$1,127, representing six post-petition automatic payments, but the record indicates
that seven post-petition payments were made.
                                           3
                                 III. DISCUSSION
       The bankruptcy court denied the Debtor’s motion for turnover and sanctions
based primarily on its finding that the Debtor – not the Credit Union – had the sole
ability to stop the “automatic” payments on the Debtor’s Loan. Therefore, the
bankruptcy court concluded, the Credit Union’s continued acceptance of those
payments did not constitute a violation of the automatic stay.5 The bankruptcy court
further held that the Credit Union was justified in accepting those payments because
the Debtor’s continued possession of the Vehicle combined with her failure to stop the
automatic payments gave the “clear” impression that she intended to retain the Vehicle
notwithstanding her stated intent to surrender it.6

       As noted above, the resolution of this appeal turns on the details of the process
by which the Credit Union received payments on the Loan. Whether the Credit Union
believed, as the bankruptcy court noted it was proper to do, that the Debtor had not
actually surrendered the Vehicle might speak to the degree of culpability for the Credit
Union’s alleged violation of the automatic stay, that belief has no bearing on whether
the Credit Union’s conduct in receiving the automatic payments and applying the
payments to the Debtor’s loan constituted an act to collect a debt prohibited by 11
U.S.C. § 362(a).

      The Credit Union contends that the automatic payment process was, essentially,
a one-step transaction; the automatic deductions from the Debtor’s paycheck were
applied directly to the Loan at the Credit Union, and the ability to cease those
payments rested solely with the Debtor. Therefore, it argues, the Credit Union did not

      5
         The bankruptcy court did not explicitly hold that the Credit Union did not
violate the automatic stay, but that holding is implicit in the court’s denial of the
Debtor’s motion.
      6
         The Credit Union never took any action to recover the Vehicle despite the
termination of the automatic stay pursuant to 11 U.S.C. § 362(h). The debtor
finally delivered the Vehicle to the Credit Union in December 2007.
                                           4
violate the automatic stay because it did not take any affirmative act to collect a debt
from the Debtor; it merely received what it believed were voluntary payments on a
loan.

       The Debtor, on the other hand, argues that the automatic deduction/payment
transaction was a two-step process, whereby the funds automatically deducted by the
Debtor’s employer from her paycheck were first deposited into her savings account
at the Credit Union and were then applied by the Credit Union to the payment of the
Loan. Characterized this way, the Debtor contends, each time the Credit Union
“applied” the funds to payment of the Loan constituted an affirmative act taken to
collect a debt in violation of 11 U.S.C. § 362(a). The Debtor might have had the sole
ability to stop the automatic deductions from her paycheck, but the Credit Union
always retained the ability to stop the application of the funds that were deposited in
the Debtor’s account.

      While great deference is generally accorded to the factual findings of the
bankruptcy court, we are of the firm conviction that the bankruptcy court erred in its
finding that the Credit Union did not have the ability to stop the “automatic”
application of the payments from the Debtor’s employer to the Loan.

      The most persuasive evidence of this is the uncontroverted fact that the regular
payroll deductions were in a greater amount than the Loan payments. Specifically, the
Debtor’s employer deducted $267.98 twice a month and deposited that amount in the
Debtor’s savings account, but the Loan payments were only $187.98. If the process
was truly a “one-step” process, as counsel for the Credit Union insisted at oral
argument, then the payments on the Loan would have been in the same amount. But
they weren’t. Consequently, we are left with the inescapable conclusion that there
was another step in the process – namely, the application of a portion of the funds
deposited into the Debtor’s account toward payment of the loan. And the Credit



                                           5
Union – not the Debtor or the Debtor’s employer – had control of that step of the
process.

       This characterization of the automatic deduction/payment transaction as a two-
step process is consistent with the affidavit of Kathy Real, the Assistant Manager of
the Credit Union, wherein Ms. Real stated, “At all times from and after March 21,
2006, Debtor had a savings account at the Credit Union, Account No. 5453004. The
monies in the Debtor’s savings account included the payroll deductions that Debtor
used to pay the loan . . . .”7 If the savings account “included” the loan payments, then
the Credit Union must have taken an additional, affirmative act to separate those
payments from the other funds in the account to make a payment on the Loan – which
is exactly how the Credit Union’s counsel described the process to the bankruptcy
court: “She (the Debtor) had a savings account at the credit union that these automatic
deductions or the payroll deductions went into and then the payments came out of
there.”8

      Section 362(a)(6) prohibits a creditor from taking “any act to collect, assess, or
recover” a pre-petition debt, and § 362(a)(3) prohibits “any act to obtain
possession...or to exercise control over property of the estate.” The Credit Union’s
application of a portion of the funds automatically deposited into the Debtor’s savings
account falls within the broad sweep these prohibitions.

       Several courts have held that a creditor’s mere receipt of an automatic payment
constitutes an act to collect a debt prohibited by § 362(a)(2).9 And notably, one of

      7
          Appellant’s App. at 55 (emphasis added).
      8
          Transcript of October 10, 2007 hearing at 14 (emphasis added).
      9
        See e.g., O'Neal v. Beneficial of Tennessee, Inc.(In re O'Neal), 165 B.R.
859, 863 (Bankr. M.D. Tenn. 1994) (“Transactions in which a creditor receives a
post-petition automatic loan payment to pay a pre-petition debt are analogous to
                                           6
these cases – In re Shepherd10 – involved the imposition of sanctions against a credit
union for its application of funds automatically deposited into a debtor’s account at
the credit union – a fact pattern strikingly similar to the facts of this case, although the
court in Shepherd did not discuss the precise mechanics of the entire transaction.

       For purposes of this appeal, we do not need to determine whether a creditor’s
mere receipt of an automatic payment constitutes a violation of the stay because here
the Credit Union took an affirmative step beyond the mere receipt of an automatic
payment – it applied a portion of the funds automatically deposited into the Debtor’s
account toward payment of a debt. And that affirmative step constitutes an act to
collect a debt prohibited by § 362(a)(6).

                                IV. CONCLUSION
       For the reasons stated above, the bankruptcy court’s order is reversed and this
case is remanded to the bankruptcy court for the entry of an order requiring the Credit
Union to turn over $1,127.00 – the amount the Debtor contends the Credit Union
collected from the Debtor in violation of the automatic stay – and for a determination
of the appropriate sanctions, which, at a minimum, should include the attorneys’ fees
incurred by the Debtor in pursuing the underlying motion and this appeal.




transactions in which a creditor continues, post-petition, to receive pre-petition
garnishments of a debtor's wages. [Therefore,] the post-petition receipt of a
pre-petition automatic loan payment also should be considered an ‘act to collect’
that violates the stay.”); In re Shepherd, 12 B.R. 151, 153 (E.D. Penn. 1981).
       10
            In re Shepherd, 12 B.R. at 153.
                                              7
