Debt Collector Can’t Blame Debtor or FDCPA for Discharge Violation

Posted by NCBRC - March 3, 2023

A debt collector’s efforts to collect an unsecured judgment that had been discharged in bankruptcy violated the discharge injunction even though the debtor requested information about the debt. The statement sent to the debtor was explicitly designated an “attempt to collect a debt,” and the debt collector had sufficient information to alert it to the debtor’s bankruptcy discharge. Skaggs v. Gooch (In re Skaggs), No. 17-50941 (Bankr. W.D. Va. Jan. 19, 2023).

In 1988, Virginia Cellular One, Inc., obtained a judgment against the debtor on a contract liability. The debtor owned no real estate so the judgment was unsecured. The debtor filed for bankruptcy in 2017. In 2019, he received his discharge, including Virginia Cellular’s judgment. Months later, he inherited real property. When he attempted to sell the property, the title agency erroneously told him that he would have to pay the judgment. The debtor contacted the debt collection agency handling the debt, the defendants in this case, and they provided him with a payoff statement and a discounted payoff amount. The payoff statement stated that it was “an attempt to collect a debt.” The debtor then emailed the defendants informing them that the debt had been discharged in bankruptcy. There was continued correspondence between the debtor and the defendants concerning repayment of the debt until the debtor’s bankruptcy attorney stepped in and informed the title agency that the debt had been discharged. The sale of the property was then completed, and the defendants’ collection efforts stopped.

The bankruptcy court found that the defendants’ collection efforts violated the discharge injunction and held a separate hearing to determine the appropriate damages. The debtor sought $25,000 in attorney’s fees and an additional $2,000 in various other costs.

The court noted at the outset that the defendants’ conduct did not warrant punitive damages because they ceased collection efforts and there was therefore no need to coerce compliance with the discharge order. Turning to the question of remedial damages, the court took into consideration whether the defendants had acted in good faith, finding that a court may take good faith into consideration when determining the amount of compensatory damages.

The court was unconvinced by the defendants’ contention that its conduct was compelled by the FDCPA. The court found the statement here was more than “information about the debt” but was an unequivocal effort to collect the debt. Furthermore, the defendants’ effort to pass the blame to the debtor for failing to provide additional information about his bankruptcy was unavailing in light of the fact that the debtor had alerted the defendants to his bankruptcy and the further information they sought was a matter of public record.

The court concluded that the defendants had not demonstrated good faith such that they were worthy of a reduction in the damages award.

The defendants next asked the court to limit the award to $910.00, the loss the debtor incurred prior to the sale of the property when the defendants ceased their collection efforts. The court declined. “In effect, the defendants argue that it is reasonable for a bankruptcy debtor to incur greater costs and expenses to obtain reimbursement than the actual reimbursement, in effect rendering an award of compensatory damages meaningless.” The court found the amount of the attorney’s fees was reasonable and ordered the defendants to pay $25,000.00.

Turning to the debtor’s request for an additional $2,000 for damages related to time away from work, transportation expenses to attend hearings and depositions, and for emotional distress, the court declined to award those damages, finding the debtor had not provided sufficient evidence to support them. With respect to emotional distress, the court added that the Fourth Circuit does not permit such damages in civil contempt cases.

Skaggs Bankr WD Va Jan 2023


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