Opinion
Case No. 00-33636-T, Chapter 7
March 26, 2001
Jonathan L. Hauser, Esquire, TROUTMAN SANDERS LLP, Norfolk, VA Counsel for Defendant/Creditor
Robert A. Canfield, Esquire, CANFIELD, SHAPIRO, BAER HELLER, Richmond, VA Counsel for Debtor
Mary Catherine Young, Debtor
Keith L. Phillips, Esquire, PHILLIPS AND FLECKENSTEIN, P.C., Richmond, VA Chapter 7 Trustee
MEMORANDUM OPINION (AMENDED)
Hearing was held January 10, 2001, on debtor Mary Catherine Young's motion to find Branch Building Trust Company (BB T) in civil contempt pursuant to 11 U.S.C. § 362 (h) and 524. Debtor bases her motion on BB T's letter sent postpetition to debtor's attorney stating that BB T would stop sending billing and statement information regarding debtor's outstanding car loan. At the conclusion of hearing, the court took the motion under advisement.
For reasons stated in this opinion, debtor's motion will be denied.
Findings of Fact.
On September 25, 1999, BB T loaned debtor the principal sum of $12,528.17 to purchase a 1996 Honda Civic automobile. The parties entered into an installment sales contract, and debtor received a payment coupon book. On June 27, 2000, debtor filed a chapter 7 petition. Since filing for bankruptcy, debtor has remained current on the loan. She listed the outstanding loan on schedule D of her petition, and her statement of intention indicated that she wished to retain the collateral without reaffirming the car loan. The balance of the loan on August 11, 2000, was $11,333.84. Debtor received a discharge on October 11, 2000.
On July 10, 2000, debtor's counsel received a letter from BB T with an attached proposed reaffirmation agreement. The letter stated that BB T would cease sending "all notices, billing coupon books and automatic bank drafts" in order to comply with the automatic stay unless debtor signed the reaffirmation agreement. BB T further stated that it was not obligated to provide the loan information but that if debtor were to reaffirm, BB T would continue to provide account information and services.
On July 24, 2000, counsel for debtor advised BB T that its letter of July 10, 2000, was an attempt to coerce debtor into reaffirming the debt and that debtor did not intend to reaffirm. Counsel for debtor also requested that the billing and account information be sent to debtor immediately.
On July 31, 2000, BB T responded to debtor's counsel that it refused to send the requested information and stated further that it was not requiring debtor to reaffirm the debt. BB T asserted that sending the requested information would violate Bankruptcy Code §§ 362 and 524.
Discussion and Conclusions of Law.
Violating the Automatic Stay and Discharge Injunctions.
Section 362 provides that, upon the filing of a petition in bankruptcy, "any act to collect, assess or recover a claim against the debtor that arose before the commencement of the case under this title; . . ." is stayed, and this applies to all entities. 11 U.S.C. § 362(a)(6). If a willful violation of the stay occurs, an individual harmed may recover "actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages." 11 U.S.C. § 362(h).
Section 524 provides that a bankruptcy discharge operates as an injunction against "the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor . . . ." 11 U.S.C. § 524(a)(3).
In addition, § 524(c) places specific restrictions on the enforcement of agreements between a debtor and claim holder, the consideration for which is based either entirely or partially on a dischargeable debt. See 11 U.S.C. § 524(c). Reaffirmation agreements that do not comply with the requirements set forth in § 524 are unenforceable, and these requirements are not subject to waiver by debtor. See In re Cherry, 247 B.R. 176, 183 (Bankr.E.D.Va. 2000) (citations omitted).
Debtor contends that BB T violated the stay by sending a coercive letter stating that it would no longer furnish loan information, as a means of forcing debtor to sign a reaffirmation agreement. Debtor asserts that she has the right to retain the collateral while keeping current on the payments, and BB T's actions contradict the principles set forth by the Fourth Circuit in In re Belanger, 962 F.2d 345 (4th Cir. 1992).
In Belanger, the Fourth Circuit affirmed the bankruptcy and district court's rulings that a debtor may retain collateral without either reaffirming or redeeming the underlying debt. "[W]hile a debtor may redeem property, subject to 11 U.S.C. § 722, or reaffirm a debt, subject to 11 U.S.C. § 524(c)(4), nothing within the Code makes either course exclusive." Id. at 347, citing Lowry Federal Credit Union v. West, 882 F.2d 1543, 1546 (10th Cir. 1989). "Confining an individual [c]hapter 7 debtor to the choices of surrender, redemption or reaffirmation can severely interfere with providing the debtor a fresh start." In re Boodrow, 126 F.3d 43, 51 (2d Cir. 1997).
In re Belanger specifically addresses § 521, concerning a debtor's obligation to give notice, if applicable, of his or her intention to surrender or retain property. If notice is applicable, debtor must state whether he or she is exempting the property, redeeming it, or reaffirming the debt. If these options are not applicable, debtor does not need to specify one of them. Thus, a debtor who has remained current on a loan may properly choose to retain the collateral without reaffirming, redeeming, or exempting the collateral. See also Sears-Roebuck Co. v. Lamirande, 199 B.R. 221, 224 (D.Mass. 1996); In re Hunter, 121 B.R. 609, 617 (Bankr. N.D. Ala. 1990); In re Crouch, 104 B.R. 770, 772-73 (Bankr.S.D.W. Va. 1989). Some circuits have ruled that the options listed in § 521 are exclusive. See, e.g., In re Edwards, 901 F.2d 1383, 1387 (7th Cir. 1990); In re Taylor, 3 F.3d 1512, 1517 (11th Cir. 1993).
Debtor argues that BB T's refusal to send account and billing information effectively violates Belanger and abolishes her choice to retain the collateral while keeping her loan current; by failing to send notices and changes in payment procedures, BB T is effectively forcing her to default on the car loan.
The court does not agree that BB T's actions restrict debtor's choice to retain the collateral while keeping current. First, and most significantly, BB T is not contractually obligated to send loan information to its customers. While the bank's refusal to send account information may result in some coercive impact to debtor, this is not sufficient to violate the bankruptcy injunctions of §§ 362 and 524. "A mere refusal to do business does not amount to improper coercion." Brown v. Pennsylvania State Employee's Credit Union, 851 F.2d 81, 86 (3d Cir. 1988), citing In re Goldrich, 771 F.2d 28, 31-32 (2d Cir. 1985).
At hearing, BB T's counsel asserted that sending billing and statement information is merely a "courtesy" that the company bestows upon its customers.
See Brown v. Pennsylvania State Employee's Credit Union, 851 F.2d 81, 85 (3d Cir. 1988) (stating that "any refusal of future services by a present creditor" will result in some coercive impact).
BB T's actions must be distinguished from the case where a creditor refuses to accept tendered loan payments, calls the loan into default, and moves for relief from stay to repossess the collateral. See In re Guinn, 102 B.R. 838, 839-40 (Bankr.N.D.Ala. 1989). In Guinn, the bankruptcy court found that the creditor's actions violated the automatic stay. However, the credit union in Guinn was not prohibited from ceasing checking and saving account services because such an action does not rise to the magnitude of coercion necessary to force the debtor into reaffirming the debt. See In re Henry, 129 B.R. 75, 78 (Bankr.E.D.Va 1991), citing In re Guinn, 102 B.R. at 842. Furthermore, BB T's letter specified that reaffirmation of the debt was not required but was an option for debtor to exercise should she desire to continue receiving billing and statement information. The fact that the letter was sent to debtor's counsel rather than to debtor personally further lessens any coercive impact. See Brown, 851 F.2d at 83 (explaining that the bankruptcy court found creditor's act of sending letter directly to debtor was a technical violation of § 362). BB T may properly send letters regarding its discontinuation of services to counsel for debtor. See Brown, 851 F.2d at 86, citing Morgan Guaranty Trust Co. v. American Savings Loan Assoc., 804 F.2d 1487, at 1491 (9th Cir. 1986).
Creditor Communications Regarding Changes in Service.
The court finds somewhat puzzling BB T's refusal to send the loan information due to debtor's failure to reaffirm her loan. With computerized noticing, it would seem simpler to continue sending the information than to make an exception for a bankruptcy account that is not reaffirmed. Moreover, the bank presumably prefers the loan to be paid in any event and should facilitate that payment by treating debtor just as it would any other borrower. Thus, the bank's approach seems self-defeating and a bit spiteful.
Nevertheless because the inconvenience to debtor of directly initiating contact with the bank does not amount to coercion, the court will not require the bank to furnish this information to debtor. Notwithstanding this holding, nothing prevents debtor from contacting BB T and requesting account information on her own.
Finally, the court notes that BB T is mistaken in its assertion that sending out loan information to a debtor's attorney would violate the automatic stay or discharge injunction. In fact, sending notices and billings "works no unfairness" to debtor and facilitates communication between the parties. Brown, 851 F.2d at 86. It could also facilitate and result in timely repayment of the loan.
Because BB T has not violated either the automatic stay nor the discharge injunction by refusing to send out loan information to debtor, debtor's motion for civil contempt will be denied.
A separate order will be entered.
ORDER
For the reasons stated in the memorandum opinion entered today, IT IS ORDERED that the debtor's motion to find Branch Building Trust Company (BB T) in civil contempt pursuant to 11 U.S.C. § 362(h) and 524 is DENIED.