The appellants were liable for willful violation of the discharge injunction when they pursued post-discharge state litigation and garnishment based on pre-petition conduct even though the debtor could have but did not raise the discharge as a defense in the state litigation. Morgan v. Morgan, No. 20-291 (D. Utah Oct. 25, 2021). Read More
Tag Archive: discharge injunction
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Post-Discharge Litigation Violates Discharge Injunction
Posted by NCBRC - November 3rd, 2021
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Law Firm and Counsel Joint and Severally Liable for D/C Injunction Violation
Posted by NCBRC - June 15th, 2021
A creditor law firm and one of its individual attorneys may be held in contempt on a joint and several liability basis for violation of the discharge injunction when the lawyer fails to cease a garnishment action and return collected wages upon learning of the debtor’s discharge in bankruptcy. Ragone v. Stefanik & Christie, LLC, No. 20-8013 (B.A.P. 6th Cir. May 13, 2021). Read More
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Fraudulent Transfer Claim Precluded by Discharge Injunction
Posted by NCBRC - April 8th, 2021
Because an action for fraudulent transfer is not merely a collection action, the creditors were precluded by the discharge injunction from pursuing their state court appeal of that action even though the predicate debt was found to be nondischargeable in the debtor’s bankruptcy. SuVicMon Dev. Inc. v. Morrison, No. 20-11681 (11th Cir. March 25, 2021). Read More
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9th Circuit Limits Walls, Permits FDCPA Action for Post-D/C Collection
Posted by NCBRC - December 4th, 2020
Declining to extend its 2002 holding in Walls, the Ninth Circuit found that a chapter 13 debtor who fully paid the creditor’s claim prior to completion of his plan was not precluded from pursuing an FDCPA claim based on the creditor’s post-discharge collection efforts. Manikan v. Peters & Freedman, L.L.P., No. 19-55393 (9th Cir. Nov. 25, 2020).
The debtor entered chapter 13 bankruptcy after receiving a notice of foreclosure from Peters & Freedman, a debt collector, based on HOA arrears. Through P&F, the HOA filed a claim in his bankruptcy, and the debtor provided for the arrears in his plan. He fully paid off the debt approximately two years prior to completion of his plan. After the debtor received his discharge, P&F hired Advanced Attorney Services (AAS) to re-serve a Notice of Default based on the debt that the debtor had paid off in his bankruptcy. AAS served the notice by breaking through a gate, entering the debtor’s backyard and banging on his windows, causing the debtor to call the police. Read More
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Ninth Circuit Applies Scotus Standard in Discharge Injunction Case
Posted by NCBRC - December 2nd, 2020
On remand from the Supreme Court, the Ninth Circuit found that, under the Supreme Court’s objective standard, the debtor’s active post-bankruptcy litigation in state court of the terms of his separation from his business partnership established sufficient cause for his business partner creditors to have a reasonable belief that he had “returned to the fray” and that their motion for attorney’s fees would not violate the discharge injunction. Lorenzen v. Taggart, No. 16-35402 (9th Cir. Nov. 24, 2020). Read More
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Lienholder May Seek Value for Post-Discharge Release of Lien
Posted by NCBRC - July 24th, 2020
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
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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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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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