by There is no private right of action for violation of the discharge injunction but a debtor may move for contempt in the main bankruptcy case. An abuse of process action, however, may be brought in an adversary proceeding and be established by repeated use of protected personally identifiable information of debtors to file unenforceable proofs of claim in Chapter 13 cases. Moore v. Comenity Capital Bank, No. 13-11325, Adv. Pro. 14-1011 (Bankr. E.D. Tenn. Sept. 29, 2014).
The debtor in Moore filed an adversary complaint seeking an order of contempt based upon the creditor’s violation of the discharge order entered in a prior bankruptcy case. The debtor also alleged in the complaint that the creditors have a practice of using personal identifying information to file unenforceable claims and that this practice constitutes a repetitive abuse of process under section 105. The complaint sought an award of attorney’s fees, and compensatory and punitive damages.
The creditor moved to dismiss the complaint on the grounds that there is no private right of action for discharge injunction violation and, in the alternative, that its filing of the proof of claim was not a violation of the injunction under section 524(a)(2).
The court began with the language of section 524(a)(2) which provides: “[a] discharge in a case under this title— . . . (2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; . . . .” The court, citing Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1261 (11th Cir. 2014), found that filing a proof of claim was an act to collect a debt as contemplated by this section. In so holding, the court distinguished or disagreed with the cases relied on by the creditor: Stooksbury v. FSG Bank, NA (In re Stooksbury), No. 08-3012, 2008 WL 2169452 (Bankr. E.D. Tenn. May 22, 2008) (debtor relied on a theory of “false claim” rather than contempt and court found no private right of action for discharge violation based on false claim); In re Surprise, 342 B.R. 119 (Bankr. N.D.N.Y. 2006) (distinguishable facts and no discussion of section 524); Clayton v. Roundup Funding, LLC (In re Clayton), No. 09-80167, 2010 WL 4008335 (Bankr. E.D. Wash. Oct. 12, 2010) (court incorrectly found filing of a proof of claim does not constitute an act to collect a debt).
Having found that the creditor violated the discharge injunction, the court turned to whether the debtor had a private right of action based on that violation. Referencing Stevens v. Citizens Tri-County Bank, No. 11-1049, 2011 WL 6812807 (Bankr. E.D. Tenn. Dec. 28, 2011), the court found that he did not. When Congress amended section 362 to include a private right of action, it did not do likewise with section 524 even though that section had long been enforceable only through contempt actions. The court found that an action based on discharge injunction violation must be brought by motion for contempt in the main bankruptcy case. The court therefore granted the creditor’s motion to dismiss the complaint for violation of the discharge injunction, but it did so without prejudice to the debtor’s filing a motion for sanctions in the main bankruptcy case.
Finally, the court turned to the debtor’s claim for abuse of process. The basis of that claim was not the violation of the discharge injunction but the business practice of using “protected personally identifiable information of Chapter 13 debtors to file unenforceable proofs of claim in Chapter 13 cases.” This claim survived dismissal in order to allow evidence to be taken to “determine whether [the debtor] can demonstrate that there are repeated intentional violations of the stay and systematic use of personal information in a wrongful manner. . . . [T]he Plaintiff has alleged enough of a systematic abuse of the bankruptcy process to survive the Defendants’ motion to dismiss.”
Because its decision divided the case into a contempt action in the main bankruptcy case and the abuse of process adversary case before it, the court indicated that it would consider consolidation for purposes of trial.
This case contrasts, in part, with the recent case of McLean v. Greenpoint Credit (In re McLean), No. 13-925 (M.D. Ala. Sept. 4, 2014), in which the court awarded damages to the debtor in an adversary proceeding for willful violation of the discharge injunction. In that case, the issue of whether section 524 creates a private right of action was not addressed.
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