discharge injunction

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Second Circuit Finds Arbitration Conflicts with Discharge Injunction

Arbitration of the debtor’s claim for violation of the discharge injunction presented an inherent conflict with the Bankruptcy Code and the bankruptcy court did not abuse its discretion in refusing to compel arbitration. Anderson v. Credit One Bank, No. 16-2496 (2d Cir. March 7, 2018).

Credit One charged off Orrin Anderson’s credit card debt, sold the account to a debt buyer, and reported the default to the major credit reporting agencies. After Mr. Anderson obtained a chapter 7 discharge, Credit One refused to change the credit report to reflect the discharge. Mr. Anderson reopened his bankruptcy and filed a class action suit complaining that Credit One’s inaction with respect to his credit reports and those of other putative class members violated section 524(a)(2). The bankruptcy court rejected Credit One’s efforts to enforce the arbitration clause in the credit card agreement. On Credit One’s interlocutory appeal, the district court affirmed. In re Anderson, 553 B.R. 221 (S.D. N.Y. 2016). [Read more…] about Second Circuit Finds Arbitration Conflicts with Discharge Injunction

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$119,000 Sanctions for Discharge Injunction Violations

Continuous confusing contact with the discharged debtors by the mortgage servicer was appropriately sanctioned at $1,000 per violation notwithstanding the servicer’s formulaic and contradictory disclaimers in some of the correspondence. Ocwen Loan Servicing v. Marino, Nos. 16-1229, 16-1238 (B.A.P. 9th Cir. Dec. 22, 2017).

Debtors, Christopher and Valerie Marino, surrendered their real property in their chapter 7 bankruptcy. After they received their discharge in June, 2013, the court granted the mortgagee relief from the automatic stay and closed the case. From June, 2013, through April, 2015, Ocwen, as servicer for the mortgagee, sent nineteen letters stating the amount owed on the debt as the “amount you must pay,” and providing payment due dates. Some of the letters contained the disclaimer that, “if you have received a discharge in bankruptcy, this notification is for informational purposes only and is not intended to collect a pre-petition or discharged debt.” Ocwen also made approximately one hundred calls to the Marinos seeking payment on the discharged debt. [Read more…] about $119,000 Sanctions for Discharge Injunction Violations

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No Personal Liability for Post-Petition HOA Fees

The debtor was not personally liable for post-petition HOA dues despite the fact that title to the property remained in his name, where he had no “significant incidents of ownership” in the property. Hovious v. Bridgewater Homeowners Assn., No. 10-2917, Adv. Proc. 16-50195 (Bankr. S.D. Ind. Feb. 15, 2017).

In his 2010 chapter 13 bankruptcy petition, debtor, Daniel Lee Hovious, listed Bridgewater Homeowners Association as an unsecured creditor to which he owed 2009 HOA dues on his residence. He also stated his intention to surrender that property to the holder of the first mortgage. He ceased making HOA payments upon filing for bankruptcy. The court confirmed the plan and ultimately granted Mr. Hovious’s discharge. [Read more…] about No Personal Liability for Post-Petition HOA Fees

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Incorrect 1099-A Form Not Objectively Coercive

An IRS 1099-A Form sent post-foreclosure by the mortgagee and misstating that the debtors were personally liable on the mortgage debt, was not an attempt to collect a debt in violation of the discharge injunction. Bates v. CitiMortgage, Inc.,– F.3d – , 2016 WL 7229754 (1st Cir. Dec. 14, 2016). [Read more…] about Incorrect 1099-A Form Not Objectively Coercive

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Discharge Injunction Does Not Apply to Domestic Support Obligation

The Missouri Department of Social Services did not violate the discharge injunction by collecting on a debt that the bankruptcy court had deemed fully satisfied through the debtors’ successful completion of their chapter 13 plan. Missouri Dept. of Soc’l Serv. v. Spencer, No. 15-6030 (B.A.P. 8th Cir. June 13, 2016).

Michael and Patricia Spencer filed a chapter 13 bankruptcy petition in which they listed a domestic and child support debt owed by Mr. Spencer to his ex-spouse. The Missouri Division of Child Support Enforcement (Division) filed a proof of claim on behalf of Mr. Spencer’s ex-spouse in the amount of approximately $36,000.00. Upon discovering that it had miscalculated the domestic support debt, the Division amended the proof of claim to over $88,000.00. When the Spencers objected to the amended proof of claim the bankruptcy court held a hearing and found that the original proof of claim was the one that should be allowed. The Division did not appeal this decision or object to confirmation of the plan providing for repayment of the original claim, nor did it object to discharge upon the debtors’ successful completion of their plan. After the discharge order was entered, the Division filed a withholding order with Mr. Spencer’s employer to collect past-due domestic support. Mr. Spencer moved the bankruptcy court for an order of contempt and sanctions. The bankruptcy court the Division willfully violated the discharge order and awarded sanctions and attorney’s fees. [Read more…] about Discharge Injunction Does Not Apply to Domestic Support Obligation

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Misapplication of Plan Payments Violates Discharge Injunction

The secured creditor violated the discharge injunction when it misapplied plan payments and then claimed default and late charges post-discharge. Scott v. Caliber Home Loans, 2015 WL 9986691, No. 09-11123, Adv. Proc. No. 14-1040 (Bankr. N.D. Okla. July 28, 2015).

When Patricia J. and Michael A. Scott filed their chapter 13 petition, the predecessor to Caliber Home Loans filed a claim for $180,527.66 with an arrearage of $19,073.96 and ongoing monthly payments of $1,414.19. The Scotts’ plan included paying off their mortgage arrears and maintaining their mortgage payments to Caliber. They made all their plan payments and prior to discharge, Caliber filed a Notice of Post-Petition Mortgage Fee, Expenses, and Charges of $2,061.82. The Scotts paid that amount through the plan. One month before discharge Caliber filed its Statement in Response to Notice of Final Cure Payment stating the debtors had cured the mortgage arrears and were current on their mortgage payments. The debtors received their discharge in March, 2014, and the trustee sent his Notice of Final Cure on April 21, 2014. On May 1, 2014, Caliber mailed a statement to the Scotts stating that they were delinquent in the amount of $3,139.97 for past due monthly payments and uncollected “Late Charges.” Caliber sent a notification that the Scotts were in default and that it had the right to undertake collection action including foreclosure. [Read more…] about Misapplication of Plan Payments Violates Discharge Injunction

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Obligations Under Condo Declaration Run with the Land

Obligations under a Condominium Association Declaration agreement run with the land and a condominium association may rent properties surrendered in bankruptcy and apply rent monies to pre-petition assessments without violating the discharge injunction. In re Montalvo, No. 10-8338 (Bankr. M.D. Fla. Feb. 25, 2016). [Read more…] about Obligations Under Condo Declaration Run with the Land

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Discharge Injunction Claim Subject to Arbitration – Overturned on Reconsideration

Discharge of the credit card debts did not render the arbitration clause of the credit card agreement unenforceable and, where the clause was valid and not in conflict with the Code, the credit card companies’ motion to compel should have been granted. Belton v. GE Capital Consumer Lending Inc., No. 15-1934, consolidated with In re Bruce, No.15-3311 (S.D. N.Y. Oct. 14, 2015). [Read more…] about Discharge Injunction Claim Subject to Arbitration – Overturned on Reconsideration

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POC Violates Discharge Injunction

Filing a proof of claim for a deficiency judgment that was discharged in a previous bankruptcy violates the discharge injunction. Green Point Credit v. McLean, No. 14-14002 (11th Cir. July 24, 2015). Green Point Credit, LLC and Green Tree Servicing LLC (Green Tree) filed a proof of claim for a debt that had been discharged in the McLean’s previous bankruptcy and the McLeans filed an adversary proceeding seeking damages for violation of the discharge injunction. Four days later, Green Tree, acknowledging that the claim had been filed in error, withdrew it. The bankruptcy court found that Green Tree violated the discharge injunction and awarded compensatory damages for the McLean’s emotional distress, attorney’s fees, and a “coercive” sanction. The district court affirmed. [Read more…] about POC Violates Discharge Injunction