Opinion
Case No. 96-17127-SSM
July 8, 1998
Klinette H. Kindred Esquire, Law Office of Robert Ross Weed, Falls Church, VA, of Counsel for the debtors
MEMORANDUM OPINION
This matter is before the court on the motion filed by the debtors on May 28, 1998, for an award of damages against Associates Financial Services Company, Inc. ("Associates") for violation of the discharge injunction by continuing to report a discharged debt as delinquent. The motion, which reflects that it was properly served on the registered agent for Associates, was made returnable to June 16, 1998. No response to the motion was filed by Associates, and no appearance was made on its behalf at the hearing. Because another motion before the court that day involved the same issue, but with somewhat different facts, the court took the matter under advisement.
Background
Paul T. and Saburnia Fran Thistle ("the debtors") filed a voluntary petition under chapter 7 of the Bankruptcy Code in this court on December 20, 1996, and received a discharge on April 3, 1997. Associates was scheduled as an unsecured creditor in the amount of $617. Certificates of mailing in the file reflect that Associates was sent notice of the commencement of the case and of the debtors' discharge. A credit bureau report dated May 22, 1998, shows a debt owed by the Thistles to "AFSCI" with a current balance of $617, a "past due amount" of $617, a last report date of May 1997, and the notation "CHARGE OFF FOR $617. BAD DEBT."
Discussion
Under § 524(a)(2), Bankruptcy Code, a chapter 7 discharge "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 [discharged] debt as a personal liability of the debtor." Such prohibited conduct includes the sending of "past due" notices with respect to a discharged debt. In re Conti, 50 B.R. 142, 146 (Bankr. E.D. Va. 1985). In the event the injunction is violated, this court has civil contempt powers to enforce it. Burd v. Walters, 868 F.2d 665, 669-70 (4th Cir. 1989) (bankruptcy court has civil contempt power under 11 U.S.C. § 105 to enforce the provisions of the Bankruptcy Code). A creditor is under an affirmative duty to ensure that the discharge injunction is not violated, and the creditor need not necessarily have set out to violate the injunction in order to be found in contempt. See In re Soils, 137 B.R. 121, 131 (Bankr. S.D. N.Y. 1992) (holding the IRS in willful violation of the automatic stay even though the violation was due to a computer error).
Surprisingly — given the pervasive role credit reports play in our society today — there appears to be only one reported decision directly addressing the issue of whether reporting a debt as delinquent can constitute an "act . . . to collect . . . [such] debt as a personal liability of the debtor." That decision is In re Sommersdorf, 139 B.R. 700 (Bankr. S.D. Ohio 1991), which held that a bank violated the co-debtor stay under § 1301, Bankruptcy Code, in a chapter 13 case when, although the automobile loan in question was proposed to be paid in full through the plan, the bank reported the debt as written off on the co-signor's credit report. The court explained that the phrase "act to collect . . . a claim," as used in § 362, Bankruptcy Code, was "intended to prevent creditor harassment of the debtor," including "conduct . . . of an informal nature, such as telephone contact or dunning letters." 139 B.R. at 701. In Sommersdorf, the bank had argued that federal banking audit requirements required a bank to charge off any amount that was more than four months in arrears. The court held, however, "[T]here is a distinction between an internal bank accounting procedure and the placing of a notation on an obligor's credit report. We find that the latter most certainly must be done in an effort to effect collection of the account." Id. (emphasis added).
Since Associates is in default, all well-pleaded facts in the motion must be taken as established. 10 Collier on Bankruptcy, ¶ 7055.02, p. 7055-5 (Lawrence P. King, ed., 15th ed. rev. 1997) ("Upon a default, the court is generally required to deem as true the well pleaded allegations of a complaint[.]"). There is no question that the debtors' liability to Associates was discharged as a result of the discharge granted them in this case. Associates' action, after the date of discharge, in reporting the debt to the credit bureau as a "bad debt" with a past due balance could hardly have any purpose except to coerce the debtors into paying the debt. Certainly, if there was some other purpose, Associates has not come forward to explain it.
The motion does not raise, and the court does not reach, the issue of whether the failure to show the debt as discharged in bankruptcy would violate the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.
A separate order will be entered granting the relief requested in the motion.