Your bankruptcy filing protects you from harassment forever. One creditor recently learned about the Debtor’s Discharge the hard way.
In March of 2013, Christopher and Valerie filed a bankruptcy petition seeking Chapter 7 relief. They listed their home in their schedules which they could not afford. So they surrendered their home to the lender.
On June 18, 2013, Christopher and Valerie received their discharge. The mortgagee, Deutsche Bank, was given relief from the automatic stay, and the case was closed on September 23, 2013. Foreclosure proceedings were initiated by Deutsche Bank after the case was closed. By then Christopher and Valerie had vacated the home.
Case Closed – Christopher and Valerie were now free to go into their future with this debt behind them.
At least, that is what they thought.
Deutsche Bank’s loan servicing agent, Ocwen, started sending Christopher and Valerie correspondence regarding the loan beginning in June of 2013 through April of 2015. The paperwork included account statements, notices pertaining to insurance, escrow statements, and other documents pertaining to the loan.
The paperwork typically contained the following disclaimer: “If you have filed for bankruptcy and your case is still active and/or if you received a discharge, please be advised that this notice is for information purposes only and is not an attempt to collect a pre-petition or discharged debt.” However, the paperwork frequently contained demands for payment by a date certain date and frequently stated that Christopher and Valerie “must pay” the debt. The “must pay” statement was in “a much more conspicuous font.” The harassment wasn’t limited to mailings, Ocwen called Christopher and Valerie on numerous occasions requesting payment.
Fed up with the harassment, Christopher and Valerie reopened their bankruptcy case and filed a motion asking that Ocwen is held in contempt of court. Their motion for contempt identified 22 separate instances where Ocwen attempted to collect the discharged debt.
Ocwen proclaimed its innocence by claiming that 14 of the letters contained the disclaimer language stating that the debt did not have to be paid if they had filed for bankruptcy. Ocwen also claimed that the letters and were sent only for “informational purposes.” Ocwen claimed that the mailings were not an attempt to collect a debt. Ocwen further argued that it was seeking “voluntary payments” only. Finally, Ocwen claimed that much of the correspondence was merely statements with no payment demands or suggestions at all.
At a hearing, Christopher testified that the property involved was his and Valerie’s dream house but they couldn’t afford it. After they got their discharge, they began receiving letters claiming that money was due, that they owed for insurance even though they had vacated the house, and that interest remained due on the debt and was accumulating.
Ocwen’s treatment created significant stress on Christopher and Valerie’s marriage to the point that they contemplated filing for divorce. Christopher testified that he “felt humiliated, tormented, and harassed.” Valerie agreed that the harassment caused them to consider divorce. Valerie had a prior problem with stomach pains that went away when the filed for bankruptcy. Those pains reemerged after Ocwen started to call. She testified that Ocwen called her between 60 and 100 times after she had received her discharge.
Ocwen’s senior loan analyst testified that state and federal regulations required that it send the letters prior to foreclosure and that they contained disclaimers for bankruptcy filers emphasizing that they had no liability. He stated that the letters which stated “you must pay” were generic letters that did not distinguish between debtors who had filed for bankruptcy and those who had not.
The bankruptcy court did agree that state and federal law required that Ocwen receive notification about the pending foreclosure sale of their house, but those regulations did not permit Owcen to insert additional language indicating that Christopher and Valerie needed to pay money on the discharged debt. The bankruptcy court awarded emotional distress damages of $1000.00 per call and per letter for a total of $119,000.00 in damages. Christopher and Valerie were awarded their attorney fees but the court did not award punitive damages.
On appeal the Appellate Panel affirmed the bankruptcy court’s holding that Ocwen had willfully violated a federal law by attempting to collect a debt that had been discharged. The court noted that it was behavior like Ocwen’s that was the reason why folks like Christopher and Valerie filed for bankruptcy. If the behavior does not stop, sanctions must be put in place to discourage such behavior.
While Ocwen may have had an obligation under state and federal law to keep Christopher and Valerie informed that their former home was in foreclosure, Ocwen’s actions went “far beyond what was necessary” and “created the perception that the (Christopher and Valerie) needed to pay Ocwen.” The Panel, therefore, affirmed the $119,000.00 award.
Christopher and Valerie also appealed and argued that the bankruptcy court should have considered a punitive damages award because of Ocwen’s behavior. The Panel agreed and stated that it was an error not to consider awarding punitive damages. See, In re Marino, 577 B.R. 772 (Bankr. App. Panel, 9th Cir. 2018).
We have found in our practice that lenders and their agents can, at times, adopt a smug attitude about their ability to steam-roll the little guy. A bankruptcy filing is one way to rid yourself of these folks and get rid of the smug attitude. If your lenders are unwilling to accept the fact that the debt has been discharged and they continue to harass you, you should see your attorney immediately. If he or she is competent you may be awarded $1000.00 for each illegal contact. There is also a possibility of being awarded punitive damages. Plus, you will not have to pay your attorney because the lender will have to pay him or her.
We at the Bankruptcy Advocates have a reputation for being aggressive in protecting our client’s rights. One of those rights is the Debtor’s discharge. If you have creditors that are still harassing you after you have filed for bankruptcy, give our office a call. Our office is in Carbondale, but we serve the entire southern Illinois area, including Marion, Harrisburg, Benton, Mt. Vernon, Herrin, DuQuoin, Pinckneyville, Chester, Sparta, Murphsyboro, Anna and Jonesboro. The first consultation is always without charge. Call us at 618-549-9800.