This January 13th, 2020, This is Bankruptcy attorney Jeff Kelly and today I would like to speak with you about how the 11th Circuit has laid out a roadmap for the rules for Discharge Violations.
So, I want to start off here talking about the stupidity of banks. What kind of creditor is dumb enough to violate bankruptcy laws and send collection letters to a debtor after a debt has clearly been discharged? In a Chapter 13 bankruptcy, answer? Nation Star Mortgage.
In the case of Arlene Roth, she clearly intended to surrender her house under chapter 13 bankruptcy that was filled December 22nd 2010. Roth received a discharge on June 27th 2014. Nation star was notified of the discharged and they received many, many, many letters and they clearly knew about the discharge. About 4 months after entry of discharge, the bank started Roth monthly statements related to her mortgage.
Can you imagine the stress of going to 4 years of a bankruptcy case, fighting to make it work, pull it together, you do, you get your discharge and then? You start receiving collection letters.
I bet this was extremely stressful on miss Roth. Nation Star never foreclosed on the property during the entire time of her Chapter 13. Who is dumb enough to let a house sit for 4 years and rot? Answer?Nation Star Mortgage.
Roth’s attorney contacted Nation Star and was ignored. The statements kept coming. Roth then filed a motion of sanctions in bankruptcy court alleging the statements violated the section 25 24 of the bankruptcy code. She also alleged that there was a civil action that the bank violated the “fair debt collection practices act” and the “Florida consumer collection practices act”.
Nation Star made the very smart move and settled the case. After the litigation was resolved, the bank was dumb enough to send an informational statement. The statement contained the due date and instructions on how to pay Nation Star.
Roth then filed a 2nd civil suit against Nation Star. Another smart move. Nation star settled again. How can a bank be so dumb to send notices to a debtor in a case they settled for sending notices? Why does this happen? My theory is that bad computer programs run a lot of banks and that there’s no human being making the decision whether to send or not to send. That’s just my guess, I don’t have anything to back this up, it’s just a theory I have but if I’m right, that would make sense why people who have filed bankruptcy keep getting notices. And I suspect, again, that many banks have decided that it’s cheaper to just settle a few cases every now and then, than spend the money that it would take to revamp entire computer systems.
So, Roth filed another motion of bankruptcy court seeking sanctions for the 2nd violations but did not succeed on this one. The Court dismissed the motion finding that the statement was not an attempt to collect a debt. The District Court affirmed as did the 11th Circuit. If you would like to read this decision, go to my website Kellycanhelp.com and you can type in the 11th circuit lays out rules for discharge violations in the search bar and it should pull up under my blog.
So, what happened here?
Why did the Court decide this? Well, let’s start with section 5 24 A2. It states that the bankruptcy discharge “operates and injunction the commencement or continuation of an act to collect such debt.. Keyword here is “collect”. And in the Roth case, Judge Brandt found several reasons to conclude that the objective letter was not to collect. Court states, as an initial matter the disclaimer is printed in bold in the first page of the statement and declares it’s for informational purposes only and is not intended as an attempt to collect or assess or recover a discharged debt from you or as a demand for payment from any individual protected by the United States Bankruptcy code”.
Sections 5 24 A2 and 105 A authorize a court to impose several contempts saying sanctions for attempting to collect a discharged debt when there is no objectively reasonable basis for concluding that the creditors conduct might be lawful under the discharge order. C. Taggart V. Lorenzon.
That’s a 2019 supreme court decision.
A court may hold, in that case the court states and I quote: A court may hold creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditors conduct. Hmmm, no fair ground of doubt, so that’s the new test? What should a person do when they keep receiving letters on debts that were discharged in their Bankruptcy case?
The answer to this question they must see the letter and get it reviewed by their bankruptcy attorney.
Ding ding ding..! Could be worse for somebody? Maybe, maybe not?
Is there a fair ground of doubt as to whether the order barred this creditors conduct?
Need to talk to your Bankruptcy attorney to find out.
If you’ve got any questions, if you want to sit down with me for a free consultation to review whether Chapter 13 or Chapter 7 might be a good option for you, give me a call at 770 8818 449. If you want more information about the bankruptcy process, feel free to go to my website I’ve got a free book on Chapter 13 and 7 we have office locations in Marietta, Kennesaw, Douglasville, Dalton Georgia, Dallas Georgia, Rome and Cartersville.
Thank you very much for Tuning in!
I appreciate you.