The discharge injunction does not prohibit a lienholder from seeking value for release of its lien so long as, under the specific facts of the case, its conduct is not an improper attempt to coerce repayment of the discharged debt. Bentley v. OneMain Financial Group, No. 19-8026 (B.A.P. 6th Cir. July 8, 2020). Read More
Tag Archive: discharge injunction
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Lienholder May Seek Value for Post-Discharge Release of Lien
Posted by NCBRC - July 24th, 2020
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Arbitration Clause Not Enforced in Discharge Violation Case
Posted by NCBRC - June 24th, 2020
In the absence of intervening legislative or Supreme Court directive, the Second Circuit followed its precedent finding that a debtor could not be compelled to arbitrate his contempt motion for violation of the discharge injunction. Belton v. GE Capital Retail Bank, No. 19-648 (2d Cir. June 16, 2020) (consolidated with Bruce v. Citicorp Inc., No. 19-655). Read More
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Bankruptcy Court May Not Enforce Discharge Order from Other District
Posted by NCBRC - November 15th, 2019
On direct interlocutory appeal, the Fifth Circuit found that courts may not use their contempt powers to enforce discharge orders issued by other courts outside their judicial districts. The court also held that the private student loans at issue were not subject to section 523(a)(8)(A)(ii)’s nondischargeability provision because that provision applies only to educational benefits where, as in the case of grants or scholarships, the obligation to repay is conditional. Crocker v. Navient Solutions LLC, No. 18-20254 (5th Cir. Oct. 22, 2019). Read More
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Court Has Discretion to Deny Arbitration in Discharge Injunction Case
Posted by NCBRC - October 21st, 2019
The Fifth Circuit found that the test it established in In re Nat’l Gypsum Co., 118 F.3d 1059, 1069 (5th Cir. 1997), was still good law notwithstanding the intervening case of Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), and that, under National Gypsum, the bankruptcy properly exercised its discretion to deny the creditor’s motion to compel arbitration in an action alleging discharge injunction violation. Henry v. Educ. Fin. Serv., No 18-20809 (5th Cir. Oct. 17, 2019).
NCBRC, NACBA and Professor Jay Westbrook provided an amicus brief, authored by NACBA member Allan Gropper, in support of the debtor in this case.
Stephanie Henry filed for chapter 13 bankruptcy ten years after entering into a student loan contract with Wells Fargo’s predecessor. After she successfully completed her five-year plan, Wells Fargo sent her a letter containing language to the effect that it was attempting to collect the remaining debt on the loan. Ms. Henry filed an adversary proceeding alleging violation of the discharge injunction. Wells Fargo moved to compel arbitration in accordance with a clause in the lending agreement under which Ms. Henry agreed to have any complaint “arising under or relating to” the debt settled by arbitration. The bankruptcy court denied Wells Fargo’s motion to compel arbitration on the basis that the cause of action did not arise under or relate to the student loan contract. The court certified the case for interlocutory appeal directly to the Fifth Circuit. Read More
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Arbitration Clause Does Not Constrain Court’s Contempt Power
Posted by NCBRC - October 14th, 2019
Finding that “[w]ords in a consumer agreement cannot deprive the bankruptcy court of the inherent power to enforce compliance with an injunction,” the district court found an arbitration clause in a consumer contract did not constrain the court’s contempt powers. Verizon Wireless Personal Communications, LP v. Bateman, No. 14-5369, Adv. Proc. No. 18-1394 (M.D. Fla. Sept. 24, 2019).
Christopher Bateman filed for chapter 7 bankruptcy listing Verizon as an unsecured creditor. Verizon did not acknowledge or take part in the bankruptcy in any way. Five months after Mr. Bateman obtained his discharge, Verizon sent him a letter attempting to collect the discharged debt. Mr. Bateman moved the court to hold Verizon in contempt for violation of the discharge injunction. In response, Verizon moved to compel arbitration, invoking its Customer Agreement with Mr. Bateman which provided that any dispute which “in any way relates to or arises out of” the agreement is subject to arbitration. The bankruptcy court found that its power to enforce its order was not subject to the terms of Mr. Bateman’s Customer Agreement with Verizon. Read More
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SCOTUS Adopts No Fair Ground of Doubt Standard for Discharge Order Violation
Posted by NCBRC - June 5th, 2019
In a unanimous decision, the Supreme Court held that “a court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.” Taggart v. Lorenzen, No. 18-489, 587 U. S. ___ (June 3, 2019).
Chapter 7 debtor, Bradley Taggart, was involved in pre-petition litigation in state court at the time he filed for bankruptcy. After he obtained his discharge, Sherwood, an opposing party in the state court litigation, obtained a judgment against him. Sherwood then sought attorney’s fees, and the state court awarded those fees notwithstanding Ninth Circuit precedent making clear that the post-petition attorney’s fees were discharged along with Taggart’s other debts. The bankruptcy court found that Sherwood was aware of the discharge and intended the act that violated it and, under that standard, it held Sherwood in contempt of the discharge order. The bankruptcy appellate panel reversed the sanction award and the Ninth Circuit affirmed, holding that Sherwood could not be held in contempt in light of its good faith belief that its conduct did not violate the discharge injunction regardless of whether that belief was reasonable. Read More
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Ambush at State Trial Costs Creditor and Her Counsel over $200,000 for Discharge Injunction Violation
Posted by NCBRC - April 30th, 2019
Creditor and her counsel were found liable for violation of the discharge injunction to the tune of over $200,000, after the creditor and her counsel blindsided the debtor during closing arguments in their state court litigation by grossly expanding the scope of the creditor’s claimed damages to encompass discharged debts. In re Renfrow, No. 17-1027 (Bankr. N.D. Okla. April 23, 2019). Read More
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SCOTUS Hears Arguments on Discharge Violation Sanctions
Posted by NCBRC - April 27th, 2019
Addressing the reach of a bankruptcy court’s contempt powers in the context of a violation of the discharge injunction, the Supreme Court heard arguments on April 24, in the case of Taggart v. Lorenzen, No. 18-489.
Daniel Geyser appeared for the debtor, Bradley Taggart. Nicole Saharsky represented the creditor, Shelley Lorenzen, executor. Sopan Joshi, from the office of the Solicitor General, argued as amicus not in support of either party. NACBA submitted an amicus brief in support of reversal.
The controversy hinged on a state court finding that Mr. Taggart’s creditor could seek contractual attorney fees in the litigation before it, even though those fees would have been subject to the discharge order injunction had Mr. Taggart not “returned to the fray.” The bankruptcy court found that the “returned to the fray” doctrine did not apply and that the litigation violated the discharge injunction. It awarded sanctions, at least in part representing the debtor’s attorney’s fees. The Ninth Circuit ultimately reversed the sanctions stating broadly that a creditor acting in good faith cannot be held liable for discharge injunction violation even if that belief is unreasonable. Lorenzen v. Taggart (In re Taggart), 888 F.3d 438 (9th Cir. 2018). Read More
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Subjective Belief that Conduct Not Subject to Discharge Order Precludes Sanctions
Posted by NCBRC - October 30th, 2018
A creditor’s good faith belief that its conduct did not violate the discharge order precludes a finding of contempt for violation of the discharge injunction even if that belief is unreasonable. Taggart v. Lorenzo (In re Taggart), No. 16-35402 (9th Cir. April 23, 2018).
Bradley Taggart, a 25% owner of a real estate business, became embroiled in state litigation involving two other 25% owners of the business after he transferred his share to his lawyer without giving the co-owners their contractual right of first refusal. Mr. Taggart filed for chapter 7 bankruptcy and the state court stayed the business litigation until after he obtained his discharge. At that time, the business litigation resumed for the purpose of unwinding the business interest, but with the condition that, due to his bankruptcy discharge, Mr. Taggart would not be liable for any monetary judgment. At the conclusion of the business litigation, however, the state court permitted both parties to seek attorney’s fees. The attorneys for Mr. Taggart’s opponents sought attorney fees for their post-discharge work on the basis that Mr. Taggart had “returned to the fray” and the fees were thus the result of post-discharge conduct not related to the bankruptcy discharge. Read More
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Exception to Discharge for Criminal Fines and Costs
Posted by NCBRC - August 28th, 2018
Where state law treats criminal fines, fees and costs as punitive rather than compensatory those debts are excepted from discharge in bankruptcy. Sanders v. AllianceOne Receivables Management Inc., No. 15-15243, Adv. Proc. No. 16-1204 (Bankr. W.D. Wash. July 6, 2018).
When Randy Sanders filed for chapter 13 bankruptcy, AllianceOne Receivables Management, Inc., as collection agency for Bellingham Municipal Court and Whatcom County, filed proofs of claim based on criminal fines, costs and fees. The debts, or “Legal Financial Obligations,” (LFO) arose out of Sentencing Orders following numerous criminal convictions. Mr. Sanders filed an adversary complaint alleging that AllianceOne’s conduct relating to the debts for which it filed proofs of claim and a debt based on a criminal conviction in the Whatcom County District Court, violated state consumer protection statutes as well as the discharge injunction from his prior chapter 7 bankruptcy. Both parties moved for summary judgment. Read More
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HAVEN Act Guide
The Honoring American Veterans in Extreme Need Act of 2019 (“HAVEN Act”) excludes certain benefits paid to veterans or their family members from the definition of current monthly income (“CMI”) found in the Bankruptcy Code. The HAVEN Act amends § 101(10A) of the Bankruptcy Code and supplements the 2005 amendments to the Code that excluded other government benefits, such as social security income.
This Guide provides an overview of the HAVEN Act identifies benefits that are excluded, and answers frequently asked questions.
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The only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA has more than 3,000 members located in all 50 states and Puerto Rico.O. Max Gardner Foundation, Inc.
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