Quick Answer: A federal bankruptcy judge in Iowa ruled on August 20, 2026 that the City of Burt willfully violated the automatic stay by continuing to bill Kelley Coburn for pre-bankruptcy utility debt after she filed Chapter 7 — and rejected the City’s defense that its own invoicing software was to blame. The court awarded her $1,500 in actual damages and denied punitive damages, and the reasoning behind that split is the part every reader in this situation actually needs.
Expert Context: I filed my own Chapter 7 bankruptcy in 1990, so I know what it feels like to watch a bill keep arriving after you’ve done everything the law requires of you. This case matters because it draws a hard line most people never think to look for: the automatic stay doesn’t just bind banks and collection agencies. It binds your city hall too.
A bankruptcy judge just told a city government that blaming its own invoicing software is not a legal defense — and the same order shows exactly what it takes, and doesn’t take, to turn a stay violation into real money.
One note before the numbers: this is one bankruptcy court’s ruling on one set of facts — it isn’t binding precedent on any other court, and it decides only this dispute between Coburn and the City of Burt. The reasoning is still worth understanding if you’re in a similar spot.
What Happened
Kelley Coburn filed a Chapter 7 bankruptcy petition on November 24, 2025, in the U.S. Bankruptcy Court for the Northern District of Iowa. She owed the City of Burt for utility service. The last statement before she filed showed arrears of $2,184.67 and a penalty of $32.29.
After the petition date, the City did the right thing procedurally: it asked the court for adequate assurance of payment under 11 U.S.C. § 366, and the court granted it, ordering Coburn to provide a $200 deposit. That part of the record matters — it’s the legal process the law provides a utility for future service, and it stands in contrast to what happened on the billing side.
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What happened on the billing side is a different story. The bill covering November 24 through December 29, 2025 identified a previous balance of $2,374.50 — a jump from the $2,216.96 combined arrears and penalty on the statement before it that the order doesn’t explain — listed arrears of the same amount, and assessed an additional penalty of $35.09, with a due date of January 20, 2026. On December 20, 2025, Coburn made a $55 payment intended for her post-petition service. The City applied it to the account balance, which still included the pre-petition debt.
The next bill, covering December 29, 2025 through January 27, 2026, showed arrears of $2,677.15, carried forward as the new “previous balance.” Coburn paid $250 on January 20, 2026, testifying that the payment exceeded what she owed for post-petition service and should not have gone toward the old debt.
Coburn represented herself. The City was represented by counsel.
The Court’s Holding
The City’s defense, in its own words, was that it “has done nothing other than send monthly invoices that provide the monthly utility amounts and, due to the software/form utilized in the normal course of business for the City’s utility invoices, past due amounts.” It argued that no law required it to manually manipulate its invoicing system or open a new account to exclude the pre-petition balance.
Chief Bankruptcy Judge Thad J. Collins rejected that argument directly:
“The fact that these statements are automatically generated by the software utilized by the City is irrelevant.”
quoting a prior Iowa bankruptcy ruling:
“Reliance upon a computer system and its data does not justify, nor excuse, actions taken in violation of the stay.”
— In re Anderson, 430 B.R. 882, 888 (Bankr. S.D. Iowa 2010)
The court went further, holding that if manually correcting the invoices or opening a new account was the only way for the City to comply with the automatic stay, the City was required to do so. The result: a finding that the City willfully violated 11 U.S.C. § 362(a)(6), the section of the automatic stay that prohibits any act “to collect, assess, or recover a claim against the debtor that arose before the commencement of the case.”
The court drew the line using an earlier Northern District of Iowa case, In re Joens, No. 03-02077, 2003 Bankr. LEXIS 1567, at *6 (Bankr. N.D. Iowa Nov. 21, 2003): a creditor may send a debtor historical account information about a pre-petition balance without violating the stay. It crosses the line once the communication attempts to collect the debt, increases the amount owed, or states that the debt is presently due. The due dates and penalties on Coburn’s bills put the City’s conduct on the wrong side of that line.
“Willful,” under the case law the court applied, does not require the City to have intended to break the law — only that it acted deliberately while knowing about the bankruptcy case (In re Cullen, 329 B.R. 52, 57 (Bankr. N.D. Iowa 2005)).
Key Terms Defined
Automatic stay: The moment you file bankruptcy, 11 U.S.C. § 362 immediately stops most creditors — including government creditors like a municipal utility — from taking any action to collect a debt that existed before you filed.
Willful violation (11 U.S.C. § 362(k)): A creditor doesn’t need to have intended to break the stay. It only needs to have acted deliberately while knowing the bankruptcy case existed.
Adequate assurance of payment (11 U.S.C. § 366): The legal process a utility uses to require a deposit or other assurance it will be paid for service going forward — it does not authorize collecting on debt that existed before the filing.
She Won — Here’s the “Well, Actually” Behind the $1,500
Here’s where I want you to slow down, because the headline — “city violates bankruptcy law” — is not the part that will actually help you if this happens to you. The real lesson is buried in the second half of the ruling: the court awarded her $1,500 in actual damages — money the court itself said compensates “some limited period of frustration and stress caused by the stay violations” — and denied punitive damages entirely. Why the number landed there instead of higher is the part to actually remember.
The court was direct about why the number wasn’t higher. It found the City’s conduct was “a limited billing error rather than persistent or egregious collection activity” — noting the City kept providing utility service throughout and had gone through the court to establish the $200 adequate-assurance deposit rather than simply cutting her off.
To win actual damages under § 362(k), Coburn had to show not just a violation and willfulness, but harm the violation actually caused (Garden v. Cent. Neb. Hous. Corp., 719 F.3d 899, 906 (8th Cir. 2013)). The court’s reasoning for not awarding more is worth reading closely:
- A larger award for emotional distress requires “proof of evidence of the nature and extent of emotional harm caused by the alleged violation” (Browning v. President Riverboat Casino-Missouri, 139 F.3d 631, 636 (8th Cir. 1998)). The court found Coburn “provided no evidence of medical or psychological treatment.” The $1,500 award compensates the “limited period of frustration and stress” the court found — not the larger award a documented course of treatment can support.
- Conflict with the City that predated the bankruptcy filing cannot form the basis for § 362(k) damages.
- Punitive damages are “typically reserved for egregious or intentional misconduct,” and the court found no evidence of “egregious, malicious, or particularly coercive conduct” here.
Being right about the violation and being fully compensated for it are two different fights. The first one is a legal question — did the creditor cross the line. The second one is an evidence question — can you show what it cost you. Coburn won the first fight decisively, and the court did compensate her for the stress it found she experienced. The evidence she had proved the violation and supported that award; the kind of evidence that raises the number — medical or psychological treatment records — is a different kind of documentation altogether.
What to Do If a Creditor Keeps Billing You After You File
This isn’t just a bankruptcy-court story — it’s a checklist for anyone dealing with a creditor, government or otherwise, who won’t stop after you file.
- Keep every bill, letter, and statement you receive after your filing date. The dates on the documents are the evidence.
- Write down the date and content of every phone call or conversation where you told the creditor about your bankruptcy case number.
- Keep proof of what you paid and what you intended it for. Coburn’s testimony that her payments were meant for post-petition service only was part of the record — a note, memo line, or written instruction with the payment makes that intent provable, not just remembered.
- If you experience real stress, anxiety, or physical symptoms, see a doctor or counselor and keep the records. The court in this case said explicitly that Coburn provided no evidence of medical or psychological treatment — that’s the gap that kept the damages number where it was.
- Bring the violation to a bankruptcy attorney, or contact your bankruptcy court’s clerk’s office about pro se guidance for stay-violation relief. Coburn pursued this herself, pro se, in her own already-open bankruptcy case, asking the court for damages under 11 U.S.C. § 362(k). The exact procedure for raising a stay violation varies by court and case — a bankruptcy attorney, or your court’s self-help resources, is the safer starting point if you’re not sure how.
Key Takeaways
- The automatic stay applies to municipal utilities and other government creditors, not just banks and debt collectors.
- Blaming the billing software didn’t work as a defense in this case — the court quoted an earlier Iowa ruling holding that reliance on a computer system doesn’t excuse a stay violation, and said so bluntly.
- Winning a stay-violation claim and being fully compensated for it are separate fights. The second one runs on documentation you have to create while the harm is happening.
The Bottom Line
If you’re staring at a bill that showed up after your bankruptcy filing, you’re not imagining that something is wrong — federal law is on your side, and this case shows one court applying it even to a city government. But don’t stop at being right. Save the bill, write down the date, keep the receipt, and if you’re genuinely losing sleep over it, tell a doctor and let them write it down too. I filed my own Chapter 7 in 1990, and the thing that carried me through wasn’t just knowing the law protected me — it was having the paper trail to prove what it cost me. Document the harm while it’s happening, because six months from now a judge will only be able to see what you wrote down.
Frequently Asked Questions
Does the automatic stay apply to a city or government utility?
Yes — the stay generally applies to governmental creditors, including municipal utilities, and in this case the court so held. The U.S. Bankruptcy Court for the Northern District of Iowa found that the City of Burt willfully violated the automatic stay under 11 U.S.C. § 362(a)(6) by continuing to bill and assess penalties on a pre-petition debt after the debtor filed Chapter 7. Whether any particular billing conduct crosses that line depends on what the creditor actually did.
Can a creditor blame its billing software for a stay violation?
No, according to this ruling. The court held that “the fact that these statements are automatically generated by the software utilized by the City is irrelevant,” quoting In re Anderson, 430 B.R. 882, 888 (Bankr. S.D. Iowa 2010): “Reliance upon a computer system and its data does not justify, nor excuse, actions taken in violation of the stay.” The court further held that if the only way to comply was to manually fix the invoices or open a new account, the creditor was required to do so.
Can a utility ask for a deposit after I file bankruptcy?
Yes — under 11 U.S.C. § 366, a utility can request “adequate assurance of payment” for service going forward, and a court can order a deposit, as happened here ($200). That process covers future service. It does not give the utility a way to keep collecting on the debt that existed before you filed.
What do I need to prove to get damages for a stay violation?
Under 11 U.S.C. § 362(k), you need to show the violation was willful — meaning the creditor acted deliberately while knowing about your bankruptcy case — and you need actual damages. In this case, the court awarded $1,500 in actual damages, which it described as appropriate compensation for the “limited period of frustration and stress” the debtor experienced because of the stay violations, and it denied punitive damages, finding no evidence of egregious or malicious conduct. A larger award — for documented emotional distress or for punitive damages — generally requires more than the billing dispute itself: medical or psychological treatment records for emotional-distress damages, and proof of egregious or intentional misconduct for punitive damages.
Do I need a lawyer to fight a stay violation?
Not necessarily as a matter of law — in this case, Kelley Coburn appeared pro se (representing herself), while the City of Burt was represented by counsel. The court found a willful stay violation and awarded $1,500 in damages. That said, 11 U.S.C. § 362(k)(1) allows a debtor to recover “actual damages, including costs and attorneys’ fees” — and if you represent yourself, there’s generally no attorney’s fee to recover, because you have no attorney. That fee-shifting piece is often the largest component of a stay-violation recovery, which is a real cost of going pro se even when you win. A bankruptcy attorney can help you document the violation, pursue full damages including any recoverable fees, and pursue punitive damages in genuinely egregious cases.
You can read the full opinion and order directly from the court: In re Kelley Marie Coburn, Bankruptcy No. 25-01318 (Bankr. N.D. Iowa, Aug. 20, 2026), via GovInfo.gov. This order is dated August 20, 2026 — I have not checked the docket since, and it may still be subject to appeal or further proceedings in the case.
The automatic stay is one of the most powerful protections you get the moment you file — and it’s also one of the most misunderstood. I’ve written before about what happened the moment I filed my own Chapter 7 in 1990, and what to do if a creditor won’t stop collecting after your bankruptcy discharge. If it’s specifically your electric, gas, or water service on the line, see what to do right now if a utility is about to shut you off. And whatever kind of creditor you’re dealing with, the documentation habit in this ruling applies everywhere — I’ve laid out the same approach for someone dealing with a store-card collector who won’t stop calling.
I’m going to tell you what I’d tell my own family member in this spot: the law is genuinely on your side here, and this case shows one court willing to enforce it even against a city government. But this is my read of one ruling, not legal advice for your specific situation — every court, every case, and every set of facts is different, and you’re the only one who can decide what steps make sense for you. Take what I’ve written here as input, not instruction.
If this helped make sense of something confusing, send it to someone you know who’s dealing with a creditor that won’t take “I filed bankruptcy” for an answer. Sometimes just knowing the law is actually on your side is the thing that changes how the next phone call goes.
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