New York Bankruptcy Litigation » Discharge Violations

Willful Violation of Bankruptcy Discharge Excused For Good Faith Error

Jay Fleischman, New York Bankruptcy Attorney — Tue, 15 Apr 2008 14:49:46 +0000

In the recent case of in-re-eady.pdf, Adv. Pro. No. 07-90271-jm (S.D. Cal. 2008) the court excused a creditor’s alleged violation of the discharge injunction and granted summary judgment against the debtor. The Court found that the acts of the defendant, alleged by the plaintiff to be violations of 11 U.S.C. § 524, were conducted by defendant with a good faith and reasonable belief that such acts were not prohibited by the bankruptcy discharge injunction in the plaintiffs bankruptcy case.

This flies in the face of the bankruptcy discharge injunction, and the prohibitions of the US Bankruptcy Code. What the court in Eady failed to realize was the the Code prohibits collection activities against a debtor once a discharge has been issued. It is incumbent upon a creditor to ensure that it refrains from such prohibited activities, and the argument put forth here amount to what I like to call the, “Stupidity Rule.”

If you’re too stupid to read the law, dear creditor, that’s alright - we forgive you.

The defendant in this case, however, is not stupid. In fact, the website maintained by the creditor clearly states that its entire business model centers around bankruptcy.

How can such a defendant be deemed too stupid to know the law, and the consequences of its actions?

How Long Does Bankruptcy Stay On Your Credit Report?

Jay Fleischman, New York Bankruptcy Attorney — Wed, 09 Jan 2008 18:02:15 +0000

Credit reporting agencies typically report bankruptcy information for a period of ten (10) years. This, however, does not mean that your credit rating will remain low for that entire time. Credit scoring takes into account the age of derogatory information, and discounts the value of that information the older it is. Therefore, the more time that passes the less important the bankruptcy will be to your credit score.

It is important to review your credit reports at least every six months to ensure that no incorrect information appears on the reports. For people who went through bankruptcy, the most common error involves creditors failing to update their reporting to indicate that the debt was discharged in bankruptcy and has $0 due.

These errors can be addressed a number of different ways, the most reliable one being through the provisions of the Fair Credit Reporting Act. The requirements for a dispute to be processed properly are very strict, but a failure on the part of the creditor to properly update the report once the errors is brought to its attention can result in a claim for a violation of the bankruptcy discharge, Fari Credit Reporting Act, and a variety of state laws.

How Do Creditors Find Out About About Bankruptcy Filings?

Jay Fleischman, New York Bankruptcy Attorney — Mon, 20 Aug 2007 04:19:20 +0000

You’ve heard it all before - a creditor continues to send dunning notices to a debtor after the filing of a bankruptcy case. You call to notify of the bankruptcy case information and are told that they never got notice.

Another case of a misplaced court notice, or stonewalling?

You guessed it, folks - you’re being stonewalled. The problem, however, is that most bankruptcy courts don’t know it, either. They take sides with the creditor or debt collector without any further inquiry.

They don’t know about Banko. Or Banko’s new cousin, Notify Solutions.

Banko, offered by our friends as Lexis-Nexis, consolidates and updates bankruptcy cases daily from all fifty states, the District of Columbia, and Puerto Rico. Banko automatically supplies comprehensive, timely bankruptcy data to subscribers. That’s right, Banko does this all automatically.

Banko’s national bankruptcy database contains complete information on all bankruptcy filings, discharges, dismissals and conversions in the United States. Banko® gathers complete bankruptcy information from all Federal Bankruptcy Districts daily and then pushes that information to the debt collector into a single bankruptcy database. Each bankruptcy filed is tracked on a case-by-case basis in order to collect all filings, 341 dates, discharges, dismissals and conversions. And the information always contains the debtor’s name, address and social security number.

This week Banko got competition from First Data Corp., an electronic transaction processor serving over 1,900 cards issuers and 5 million merchants. The Notify Solutions product compiles public records from 7,000 federal, county and local courthouses nationwide in addition Guam, Puerto Rico, and the U.S. Virgin Islands. The bankruptcy database is updated daily and allows users to remove the account from their collections efforts and stop all mailings and other attempts to communicate with the account.

So next time a creditor takes action post-filing (or worse, post-discharge) don’t take their word for it that they made an innocent mistake - chances are, they knew about the bankruptcy filing before the trustee was assigned.

And when there is a willful and intentional violation of the automatic stay or discharge order, there is a cause of action for damages and legal fees.

Plaintiff Can Sue Under Fair Credit Reporting Act In Bankruptcy Court

Jay Fleischman, New York Bankruptcy Attorney — Tue, 06 Mar 2007 15:45:58 +0000

In yet another victory for consumers seeking to enforce their rights in bankruptcy court, Judge Leif M. Clark of the Western District of Texas got it right. In the case of In re Calvillo, Plaintiff sued a Defendant in bankruptcy court alleging, among other things, a violation of the Fair Credit Reporting Act. The Defendant made a motion to dismiss, claiming that a Plaintiff cannot make a claim under the Fair Credit Reporting Act in bankruptcy court due to preclusion issues. To support this position, the Defendant used the case of Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir. 2001).

However, the court found more persuasive the reasoning offered up by Judge Frank Easterbrook, of the Seventh Circuit, who authored a decision of a panel of that circuit which rejected Walls. See Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir. 2004); see also Turner v. J.V.D.B. & Associates, Inc., 330 F.3d 991 (7th Cir.2003); Hyman v. Tate, 362 F.3d 965 (7th Cir.2004). Said Judge Easterbrook, “When two federal statutes address the same subject in different ways, the right question is whether one implicitly repeals the other – and repeal by implication is a rare bird indeed. It takes either irreconcilable conflict between the statutes or a clearly expressed legislative decision that one replace the other.” Id., at 730, citing Branch v. Smith, 538 U.S. 354, 273 (2003). Judge Easterbrook concluded that neither was to be found in the case of the FDCPA. Similar logic indicates the ruling in that circuit would be the same were the FCRA before the court.

When A Creditor Violates The Fair Credit Reporting Act, You Are Not Limited To Bankruptcy Court

Jay Fleischman, New York Bankruptcy Attorney — Sat, 20 Jan 2007 17:09:08 +0000

A question continually comes up as to whether a debtor is forced to turn to the bankruptcy courts when a creditor violates the Fair Credit Reporting Act with respect to a discharged debt or whether the doors of the District Court remain open.
The leading case, cited by virtually every creditor when faced by this question, is Walls v. Wells Fargo, N.A., 276 F.3d 502 (9th Cir. 2002).
Walls held that a debtor could not make a claim for a violation of the Fair Debt Collection Practices Act as well as for a violation of the bankruptcy discharge. The court determined that the FDCPA and the Bankruptcy Code do not co-exist but rather that the Bankruptcy Code pre-empted the FDCPA.
Over time, Walls has been distinguished and chipped away by many courts, including those in the 9th Circuit. The recent case of Wakefield v. Cavalry Portfolio Services, LLC., Case No. 06-CV-1066-BR (USDC Oregon 2006) continues that trend by holding that the Fair Credit Reporting Act and the US Bankruptcy Code co-exist.
In Wakefield, the debtor sued a creditor that had repeatedly obtained copies of her credit report after her bankruptcy discharge. The basis of the lawsuit was 15 U.S.C. § 1681q, which provides that “Any person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined under Title 18, imprisoned for not more than 2 years, or both.”
The court, relying on In re Miller, No. 01-02004, 2003 WL 25273851, at *2 (D. Idaho Aug. 15, 2003) as well as the holding of the U.S. Bankruptcy Court for the Eastern District of Virginia in In re Potes, 336 B.R. 731, 733 (E.D. Va. 2005), held that the FCRA and the Bankruptcy Code co-exist, and that the same act could give
rise to remedies under both FCRA and the Bankruptcy Code.
You can read the entire decision in Wakefield v. Cavalry Portfolio Services, LLC., Case No. 06-CV-1066-BR (USDC Oregon 2006) by clicking here.

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