Order denying a debtor’s requests for sanctions based on alleged violation of the automatic stay. An individual chapter 7 debtor moved for damages against the North Carolina Division of Motor Vehicles (the “NCDVM”) under 11 U.S.C. 362(k), alleging it had violated the bankruptcy automatic stay by revoking her vehicle registration to collect a pre-petition civil penalty that was assessed because the debtor’s vehicle insurance had lapsed. The Court denied the motion because the debtor could not demonstrate that the NCDMV had acted to collect a pre-pre-petition debt and because, to the extent revoking the debtor’s vehicle registration was an exercise of control over estate property, the NCDMV’s action fell within the “police and regulatory power” exception to the automatic stay.
     About a month prior to the petition date in this case, the debtor experienced a lapse in motor vehicle liability insurance. This lapse was reported to the NCDMV, which initiated a statutorily mandated process to determine whether the debtor had financial responsibility for her vehicle. That process involved issuing a notice to the debtor requiring her to provide evidence of liability insurance by the end of a period that ultimately fell weeks after the petition date. When the debtor failed to respond, the NCDMV was required by statute to assess a civil penalty and revoke her vehicle registration. This led the debtor to allege an automatic stay violation.
     The Court laid out several reasons for denying the debtor’s motion. First, the Debtor’s argument that the NCDMV revoked her vehicle registration to collect a pre-petition debt failed because the NCDMV did not assess a civil penalty until after the petition date, making it a post-petition debt. Second, same argument failed because the civil penalty and registration revocation are distinct and independent enforcement requirements of the statute under which the NCDMV acted. There is no relationship between the civil penalty and the revocation whereby the latter can be understood as an enforcement mechanism of the former. Third, and finally, the Court found that to the extent the NCDMV might have exercised control over property of the estate, its actions were excepted from the automatic stay under 11 U.S.C. § 362(b)(4)— the “police and regulatory power” exception to the automatic stay.
     Under § 362(b)(4), a bankruptcy petition "does not operate as a stay . . . of the commencement or continuation of an action or proceeding by a governmental unit . . . to enforce such governmental unit’s . . . police or regulatory power, including the enforcement of a judgement other than a money judgement." A governmental unit, defined in 11 U.S.C. § 101(27), exercises its police or regulatory power when the purpose of the law it enforces “is to promote ‘public safety and welfare’” or “effectuate public policy” rather than to “protect the government’s pecuniary interest in the debtor’s property.” Safety-Kleen, Inc. v. Wyche, 274 F.3d 846, 865 (4th Cir. 2001) (citation modified). The Court determined that the provisions of North Carolina’s Vehicle Financial Responsibility Act of 1957 primarily reflected the state’s concern for safety and public welfare, and it therefore concluded that the § 362(b)(4) exception applied to the NCDMV’s revocation of the debtor’s registration in this case. So, the debtor’s motion for sanctions was denied.