Opinion
Case No. 96-17127-SSM
September 10, 1997
Klinette Kindred, Esquire, Falls Church, VA, of Counsel for the debtors
MEMORANDUM OPINION
This matter is before the court on the debtors' motion for an award of damages against Beneficial Credit Services ("Beneficial") for violation of the automatic stay and the discharge injunction. A hearing was held in open court on September 9, 1997. The debtors were present by counsel. Beneficial, despite having been served with the motion and notice of hearing, did not appear and has not filed a response to the motion.
Facts
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 of their dischargeable debts on April 3, 1997. Beneficial Credit Services was listed as a creditor and was sent notice of the commencement of the case and of the discharge. Beneficial's claim was scheduled in the amount of $1,462, secured by "Bikes and Bike Accessories" with a value of $1. On their statement of intention, the debtors stated that they intended to retain the collateral but did not indicate that they would reaffirm the debt, redeem the collateral or avoid the lien. The debtors allege in their motion that they "offered [Beneficial] a compromise reaffirmation" which Beneficial rejected. The motion further alleges that after negotiations broke down, "Beneficial resumed billing Debtors for the full amount of the scheduled debt." The number of such bills, and the dates they were sent, is not alleged. Attached to the motion, however, is a bill to the debtors with a "closing date" of July 16, 1997, a "previous balance" of $1,438.97, a finance charge of $19.81, a "new balance" of $1,458.78, and a "minimum amount due" of $287.00. The bill contains the notation, "Payment Due On or Before 08/10/97" and a further notation, "YOUR ACCOUNT IS NOW SERIOUSLY IN ARREARS AND YOUR CREDIT PRIVILEGES HAVE BEEN SUSPENDED. MOST IMPORTANT YOU CALL THE TELEPHONE NUMBER ABOVE." On July 30, 1997, the debtors filed the motion that is presently before the court seeking an order requiring Beneficial to "provide proof that they have notified all credit reporting agencies that this debt has been discharged in bankruptcy" and an award of damages in the amount of $800, representing time lost from work, and attorneys fees incurred, responding to Beneficial's demand for payment.
Conclusions of Law and Discussion
Under § 362(a)(6), the filing of a bankruptcy petition creates an automatic stay of "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case." With respect to actions against the debtor, the automatic stay terminates when the debtor receives a discharge. § 362(c)(2)(C), Bankruptcy Code. The discharge itself, however, "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." § 524(a)(2), Bankruptcy Code. Thus, actions to collect a pre-petition debt as a. personal liability of the debtor are stayed during the pendency of the case by the automatic stay and are barred thereafter by the discharge injunction. Valid liens, however, unless expressly set aside ("avoided") during the bankruptcy, are unaffected by the debtor's discharge. See, Johnson v. Home State Bank, 501 U.S. 78, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991). Although enforcement of liens is stayed during the pendency of the bankruptcy by § 362(a), once the stay expires, a creditor whose lien has not been avoided is free to enforce a valid security interest in property retained the debtor. However, the creditor is limited to its collateral and may not seek to enforce its claim as a personal liability of the debtor. Thus, for example, a creditor may peacefully repossess its collateral or may bring a court action for possession, but may not demand payment from the debtor and may not seek an award of money damages against the debtor. Meyers v. Beneficial Finance Co. of Va. (In re Meyers), 18 B.R. 362 (Bankr. E.D. Va. 1982); Pierce v. Woodward (In re Pierce), 29 B.R. 612 (Bankr. E.D. N.C. 1983). This includes seeking a judgment for the "alternate value" of the collateral under the Virginia detinue statute. Meyers, supra; Martin v. Avco Financial Svcs. (In re Martin), 157 B.R. 268 (Bankr. W.D. Va. 1993). See In re McNeil, 128 B.R. 603 (Bankr. E.D. Pa. 1991) (prayer for "special damages" in Pennsylvania replevin action violated discharge injunction).
In Meyers, Judge Bonney of this court imposed a $10,000.00 fine against Beneficial Finance Co. for bringing detinue actions against discharged debtors in which Beneficial sought a money judgment for the "alternate value" of the collateral.
In the case presently before the court, there is no showing that Beneficial has violated the automatic stay. The only billing statement before the court is dated some three months after the debtors were granted a discharge. As noted above, the granting of the discharge terminated the automatic stay. That leaves the question of whether sending the bill violates the discharge injunction. That question must rather clearly be answered in the affirmative. The bill is a demand for payment, pure and simple. See, In re Conti, 50 B.R. 142 (Bankr. E.D. Va. 1985) (sending "past due notice" with respect to discharged liability violated the discharge injunction). There is no mention of the collateral and no indication that the creditor is merely providing information as to the amount of its lien.
This court has civil contempt power under § 105, Bankruptcy Code, to enforce the provisions of the Bankruptcy Code. Burd v. Walters, 868 F.2d 665 (4th Cir. 1989). Having considered the fact that Beneficial has offered no explanation or excuse for its violation of the discharge injunction, the court concludes that an appropriate remedial sanction is a fine payable to the debtors in the amount of their lost wages and the attorneys fees they incurred responding to Beneficial's demand for payment. Accordingly, a separate order will be entered finding Beneficial in civil contempt for violation of the discharge injunction and imposing a fine payable to the debtors in the amount of $800.00, payable within ten days, and enforceable as a money judgment if not paid.