PNC’s TILA obligation to provide regular statements concerning the plaintiffs’ debt resumed after the debtors received their bankruptcy discharge even though the plaintiffs’ bankruptcy case was not closed until almost four years later. Polonowski v. PNC Bank, NA, No. 20-151 (W.D. Mich. Jan. 23, 2023).
The plaintiffs had a home equity line of credit (HELOC) with PNC which was secured by a mortgage on their residence. Pursuant to its obligation under the Truth in Lending Act (TILA), PNC sent the debtors periodic statements concerning the debt. When the debtors filed for chapter 7 bankruptcy, PNC stopped sending the statements. While their bankruptcy was still pending the plaintiffs reaffirmed their debt to PNC. On November 15, 2018, the plaintiffs received their discharge, but their bankruptcy case remained open until July, 2022. PNC failed to resume the periodic statements, informing the plaintiffs’ counsel that it would not send statements so long as the bankruptcy case remained open.
The plaintiffs filed suit against PNC in district court and moved for partial summary judgment on the issue of liability.
PNC argued that its obligation to send periodic statements under TILA conflicted with bankruptcy’s automatic stay, and that TILA releases creditors from their obligation to issue account statements when doing so would violate other federal laws. In PNC’s view, as long as the bankruptcy remained open, the property remained part of the bankruptcy estate under section 362(c)(1), and it could not send statements.
The court agreed that when the plaintiffs filed for chapter 7 bankruptcy, the stay suspended PNC’s obligation to issue statements, but found that, under section 362(c)(2)(C), its obligation resumed when the plaintiffs received their discharge.
To the argument that the property remained part of the bankruptcy estate, the court emphasized the distinction between in rem and in personam proceedings, noting that because the plaintiffs had reaffirmed the debt, their bankruptcy discharge lifted the stay with respect to them. The court stated that sending information about a debt was not an “act against the property of the estate.” It analogized the case with one involving the discharge injunction noting that a creditor seeking to collect post-discharge on a debt the debtor had reaffirmed, would not violate the discharge order.
The court concluded that the plaintiffs’ interpretation of sections 362(c)(1) and 362(c)(2)(C) was consistent with the parameters of the automatic stay and with the historical distinction between in rem and in personam proceedings, and that “Defendant’s interpretation is not consistent with either the statutory language or the historical approach to acts against the person and acts against property.”
The court granted the plaintiffs’ motion for summary judgment on the issue of liability.