Bankruptcy Court Lacked Power to Issue Punitive Sanctions

A Vermont bankruptcy court didn’t have the authority to issue $375,000 of sanctions against a mortgage company, a Vermont district court judge held.

Specifically, the court wasn’t empowered by Bankruptcy Rule 3002.1(i) to issue punitive sanctions, nor could it do so under 11 U.S.C. §105 or the court’s inherent powers, Judge Geoffrey W. Crawford, District of Vermont, said in his Dec. 18 opinion.

This is the first time a court has considered whether Rule 3002.1(i) allows a judge to issue punitive sanctions, the court said.

The matter arose with PHH Mortgage Corp.'s acts in three separate Chapter 13 cases pending ...