A couple of banks found out that it’s expensive to ignore the bankruptcy discharge.
For a change, money will flow from banks to my clients. Because even a bank can’t just do business as usual when their borrower files bankruptcy.
Equally important, the judge recognized, in dollars, the emotional costs to debtors when their discharge is ignored. And she awarded compensatory damages without live testimony, expert witnesses, or protracted discovery.
Bravo for common sense on the bench. She put real teeth in the bankruptcy court’s discharge order.
Discharge poorly enforced
Bankruptcy judges have regularly called out creditors for bad behavior and made debtors whole for their attorney’s fees. But, too often, in my experience, the harassed debtor got no meaningful monetary recovery.
For me, that unwillingness to put a dollar value on the peace which is supposed to flow from the bankruptcy discharge has been a huge hole in the bankruptcy system. It leaves the debtors feeling cheated of all of the benefits they expected when they made the hard choice to file bankruptcy.
Until it becomes more expensive to the scofflaw creditors to ignore the discharge than to honor it, debtors get only a fraction of what the discharge promises.
Debtors must enforce their discharge
Neither judges nor bankruptcy attorneys can fix the problem if the victim doesn’t make themselves heard.
The flip side of the problem of discharge violation is that after the bankruptcy case is closed, debtors assume they have no remedy. They simply suffer continuing collection efforts.
Or, the debtor assumes that his lawyer screwed up. Why else would this creditor keep bothering him.
My clients helped their case by keeping most of the dunning letters sent by the creditor over several years.
The case would have been better still, for this judge anyway, if they’d kept a log of the phone calls and what was said. The fact that the creditor kept calling wasn’t sufficient proof that the call attempted to collect a debt.
Creditor pays for its mistakes
The creditors in my case will end up not only paying their Tall Building Lawyers to oppose our motion for sanctions, but they will pay my fees to make them stop.
In the thousands of dollars.
You see, the bankruptcy discharge is an injunction from a federal court. It prohibits acts to collect a discharged debt as a personal liability of the debtor.
Ignore the order and you are in contempt of court.
When a debtor proves that the creditor knew about the discharge and intentionally acted anyway, the debtor gets compensatory, or civil, sanctions.
Almost without exception, the sanctions include payment of the debtor’s attorneys fees.
These creditors will also pay for the fee to reopen the case to get the matter before the judge.
It’s some solace to my clients who don’t feel as victimized as before.