In In re Powell, No. 10–03859 (Bankr. E.D. N.C. June 26, 2012), the court put a leash on the creditor’s dogged pursuit of the debtors. The court found that the creditor, Bank of America and its servicer, violated the discharge injunction and the automatic stay when it foreclosed on the debtors’ residence after they filed bankruptcy, and relentlessly dunned them for payments post-discharge.

After the debtors obtained their bankruptcy discharge the creditor began sending monthly billing statements seeking to collect on the mortgage for property the debtors had surrendered. The debtors’ attorney responded with several warning letters and finally with a motion to the court for sanctions. With the exception of one letter claiming to be a debt collector under the FLSA, the creditor otherwise responded like a mindless automaton. It continued its monthly collection efforts unabated. At the hearing on the motion, which the creditor did not attend, one of the debtors testified to the stress and anxiety caused by the continued billing and the ever-increasing amount owed. The court invoked its contempt power under section 105, under which four conditions must be met: 1) there must be a valid decree of which the contemnor had actual or constructive knowledge; 2) the decree must be in the movant’s favor; 3) the contemnor must have violated the terms of the decree, with knowledge of such violations; and 4) the movant must have suffered harm as a result. Finding that each of these conditions was met, the court awarded attorney fees in the amount of $3,000.00, damages in the amount of $2,500.00 and sanctions in the amount of $50,000.00.

Powell opinion