Secured Lender’s Post-Discharge Communications To Debtor Did Not Vio...

In Mele v. Bank of America, et al., Adv. Proc. No. 12-5031, 486 B.R. 546, 2013 Bankr. LEXIS 455 (Bankr. N.D. Ga. January 8, 2013)(J. Ellis-Monro) (click here for .pdf copy of opinion), the issue before the Court was whether certain communications sent by the home lender after the Debtor’s Chapter 7 was discharged violate the discharge injunction of 11 U.S.C. §524.  The Debtor re-opened her Chapter 7 and filed a pro se adversary proceeding against the lender and its agents, alleging that the “excessive” and “aggressive” communications (15 over a period of about 18 months) violated the discharge injunction, caused great stress, and affected her health.  Debtor claimed she was afraid to answer the phone, became a recluse and lost weight.  Although it was apparently not relevant to the outcome of the case, the Judge pointed out that the Debtor had made no payments on her home since she filed her Chapter 7 case in August 2010, and she claimed that a foreclosure “wasn’t right.”  In addition, Defendant did not make any calls to the Debtor, while Debtor called Defendant six times during the relevant time period.

A trial was held on November 12, 2012, after which Judge Ellis-Monro ruled in favor of the lender. 

The case was very fact intensive and Judge Ellis-Monro reviewed each communication and divided them into four categories:

1. Four Informational forms that clearly contain disclaimers that the correspondence is for information purposes only, and contain information about fees, payoff information, verification of the mortgage, and the assignment of the account to another servicer.  These communications did not violate the discharge injunction as they did not seek to collect a debt from the Debtor.  The overall tenor of the communications was informational.
2. Three forms that contain FHA Information that contains information required by the FHA prior to a foreclosure as well as information about programs available to assist borrowers. These communications did not violate the discharge injunction
3. Five pieces of correspondence were Responses to the Debtor’s inquiries. These communications did not violate the discharge injunction because they were responses from inquiries from the Debtor and do not include any amounts owed or demands for payment.
4. Three Statements that show account information such as account number, balance, payment amount, etc., and which include disclaimers and notices that the Debtor has no obligation to repay the discharged debt and the statement is provided as a convenience to the Debtor or at her request. These communications did not violate the discharge injunction as they were sent to inform the Debtor of facts that may facilitate her retention of the property and to identify the amount necessary to release the lien.  Although two of the statements did contain the words “demand” and “Total Amount Due” they also contained a disclaimer that there was no obligation to pay the debt after discharge.

Finally, the Court held that the cumulative affect of the communications was not an attempt to collect a debt.

None of the fifteen documents sent to [Debtor], on an individual basis, seek to collect a debt personally from [Debtor]. However, the collective effect of these fifteen items must be considered as well. The fifteen documents sent to [Debtor] were sent over an eighteen month period. During that period, Defendant did not make any telephone calls to [Debtor]. Two-thirds of the documents sent to [Debtor] merely provide information or respond to [Debtor]‘s request for information. The Account Statement seeks to facilitate retention of [Debtor]‘s home and the Payoff Demand Statements provide required information prior to exercise of in rem rights. The informational notices associated with the Payoff Demand Statements (Exhibits 6 and 11) provide information to facilitate payoff if one is made (Exhibits 6 and 11). The Court finds that the entire correspondence from Defendant to [Debtor] did not constitute an attempt to collect a debt personally from [Debtor].

The Judge entered judgment in favor of the Defendant lender.  Debtor filed a Motion for Reconsideration that was denied by the Court as it presented no new facts or evidence and only argued that the Court made an error in judgment.  No appeal was filed.  As stated, the Judge reviewed every communication in detail, including the disclaimers and other information contained in each.  A more detailed review of the opinion is necessary to determine whether communications sent in other cases would violate the injunction.