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Posted:
August 2, 2012
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Bankruptcy Cases in the News

Bankruptcy Cases in the News

In previous blog postings we have discussed on many occasions the basic tenet that the honest debtor is entitled to relief of a discharge in bankruptcy. But what about those debtors that are dishonest or engage in risky behavior that implicate or harm others. The Bankruptcy Code provides for these types of cases in 11 USC 523 as exceptions to the general rule that in exchange for full disclosures and non-exempt assets that a debtor can obtain a complete discharge and a fresh start. In addition, a body of judge made decisions had also developed interpreting the various parts of 11 USC 523.

Most of the exceptions to discharge are common sense and are not surprising. For instance, debts arising from fraud, false pretenses, misrepresentations, luxury charges made on the eve of filing bankruptcy, child support, alimony, taxes and other types of intentional injuries. These are matters which evidence dishonorable conduct or a bad actor that should not be assisted.

In a very recent case Judge Walter Shapero of the U.S. Bankruptcy Court, Eastern District, Southern Division of Michigan decided a very interesting case. In that case it was fairly undisputed that the debtor was a very reckless driver of an automobile which led to an automobile crash causing personal injuries. When the debtor filed her bankruptcy In re Gumprecht, Case No.: 11-47982; Ad. Pro. No. 11-05909, the injured party objected to the discharge as being unfair based upon 11 USC 523(a)(6) a willfully caused injury. As mentioned the evidence showed that the debtor’s driving was horrendous but there was nothing to show that an injury was specifically intended or willful and malicious. Judge Sharpero held that the case must be reviewed under the standards announced in Kawaauhau v. Geiger, 523 U.S. 57 (1998) and in re Markowitz, 190 F3d 455 (6th Cir. 1999). As such, he stated:

    Until 1999, the Sixth Circuit’s standard for § 523(a)(6)’s “willful” requirement was rather lenient. As long as a debtor could be shown to have intentionally committed an act which led to an injury, he would be found to have acted “willfully” under § 523(a)(6), regardless of whether or not he actually intended the injury. Perkins v. Scharffe, 817 F.2d 392, 394 (6th Cir. 1987). Perkins was overruled in 1998 by the U.S. Supreme Court case of [Geiger]. In Geiger, the Supreme Court held that only acts done with the intent to cause the actually injury will rise to the level of a “willful and malicious injury” as used in § 523(a)(6): We now hold that unless “the actor desires to cause consequences of his act, or… believes that the consequences are substantially certain to result from it,” he has not committed a “willful and malicious injury” as defined under § 523(a)(6). [Markowitz, 190 F.3d at 464.]

Under the new standard the burden of proof is much higher for the creditor. For that reason Judge Shapero determined that the facts that the creditor could establish were insufficient and dismissed the objections to discharge.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
June 15, 2012
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Bankruptcy Cases in the News

Bankruptcy Cases in the News

In recent blogs we have discussed the necessity to scrupulous honesty in preparing all schedules with respect to a bankruptcy petition. It all goes back to the basic concept that it is only the honest debtor that is entitled to a discharge and a fresh start. In that regard, this post has to examine some federal cases which dealt with the concept of judicial estoppel.

Judicial estoppel is a common law concept for the protection of the Courts from a party seeking and obtaining a certain determination in one Court and then taking the opposite position in another Court.

Recently, the Michigan Court of Appeals, in Spohn v. Van Dyke Schools, examined such a case and affirmed (agreed with) the decision of a trial court judge, which dismissed the Plaintiff’s claim for employment discrimination. Specifically, the trial court judge determined that the Plaintiff had filed an earlier bankruptcy and failed to disclose in her Schedule B, statement of personal property, that she had a potential claim for an employment discrimination suit. When the Plaintiff received her discharge, it was based upon the representation that she did not have such a claim and that constituted a binding determination.

Plaintiff should have disclosed the claim. The bankruptcy trustee would then determine whether to bring the claims for the benefit of all the creditors or to abandon the claim, if it was weak. Clearly the Plaintiff knew she had a claim, failed to disclose it to the Bankruptcy Court, trustee or creditors and then filed the same later in another court.

The Michigan Court of Appeals stated the rationale as follows:

 The rationale for… decisions [invoking judicial estoppel to prevent a party who failed to disclose a claim in bankruptcy proceedings from asserting that claim after emerging from bankruptcy] is that the integrity of the bankruptcy system depends on full and honest disclosure by debtors of all of their assets. The courts will not permit a debtor to obtain relief from the bankruptcy court by representing that no claims exist and then subsequently to assert those claims for his own benefit in a separate proceeding. The interests of both the creditors, who plan their actions in the bankruptcy proceeding on the basis of information supplied in the disclosure statements, and the bankruptcy court, which must decide whether to approve the plan of reorganization on the same basis, are impaired when the disclosure provided by the debtors in incomplete.

 

*****

 

The debtor signed her bankruptcy petition under penalty of perjury. By doing so, she certified that she had no claims against the Defendants. It was the Debtor’s responsibility to verify the accuracy of the information contained in her schedules and statement of financial affairs and she “had the duty to carefully consider all of the questions posted and to see that they [were] completely and correctly answered.”

 

It is therefore a cardinal rule to always disclose. Making unnecessary disclosure will never hurt the honest debtor, but failure to disclose may very well be a source of trouble, including denial of discharge, judicial estoppel, and even criminal charges.
If you have a question about the Bankruptcy Laws, please feel free to call Guy Vining of the Vining Law Group for a no charge and confidential consultation.

 

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
June 15, 2012
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Employment Law Cases: Discrimination Award

EMPLOYMENT LAW CASES

Discrimination Award

The Buffalo News has recently reported a $25,000,000 verdict in a racial harassment case in the state of New York. An African American was, according to the article, subjected to a culture of racism and discrimination, which management did not correct.

Guy Vining of the Vining Law Group has represented both employers and employees in racial discrimination cases. Race is a protected category in employment and under both State and Federal law in Michigan, and may not be used as a factor in effecting employment decisions. Moreover, race is one of the protected categories with respect to a basis of a harassment claim.

In this particular case, the employee alleged, and the jury determined, that the employer allowed a racially hostile environment to exist which included racial graffiti.

If you have questions about the discrimination laws in Michigan, please feel free to call Guy Vining for a no charge and confidential consultation.

Guy Vining has practiced law throughout the state of Michigan. His office is located in the downriver city of Taylor where he primarily serves the Metro-Detroit area. He has represented employers and employees in employment litigation in the trial court and the appellate courts in the following areas: whistleblower, breach of contract, public policy, discrimination, wage and hour violation, covenants not to compete, Americans with disabilities action and retaliation

Posted:
May 10, 2012
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Bankruptcy Cases in the News

Bankruptcy Cases in the News

The 6th Circuit Court of Appeals issued an important and very interesting case recently in White v. Wyndham Vacation Ownership, Inc., 617 F3d. 472 (2010). This Court is the Court of Appeals for a great number of Midwestern Bankruptcy Courts, including the State of Michigan. The White case shows the importance of full disclosure of all assets in a consumer bankruptcy case. As we have discussed in the past blog postings, failure to make full disclosure can result in the dismissal of a case, attorney fees and in some instances, criminal charges.

The White case dealt with an interesting additional concept called “judicial estoppel.” Here is what happened. When Mrs. White signed and filed her bankruptcy petition she forgot to list as a possible asset of a lawsuit against her former employer, Wyndham. Apparently, the reason she had financial problems was because she had been discharged under circumstances which were suspicious of employment discrimination. A potential lawsuit is an asset.

Neither in her plan, nor in her schedules did she disclose to the Bankruptcy Court or her creditors that she had a significant cause of action for employment discrimination against her former employer, Wyndham. After her plan was approved and before she filed suit against Wyndham, she made some attempts to modify her bankruptcy schedules regarding the employment claim. Still, the U.S. District Court dismissed her lawsuit for discrimination, at her former employer’s request, based upon judicial estoppel and the 6th Circuit affirmed the dismissal. The 6th Circuit discussed in the opinion the doctrine of judicial estoppel:

    In the bankruptcy context, this court has previously noted that “judicial estoppel” bars a party from (1) asserting a position that is contrary to one that a party has asserted under oath in a prior proceeding, where (2) the prior court adopted the contrary position either as a preliminary matter or as part of a final disposition. [Citations omitted.] Id. At 476.

The White court noted that the doctrine was “utilized in order to preserve the integrity of the courts by preventing a party from abusing the judicial process through cynical gamesmanship.” Id. The Court further noted that it is the debtor’s absolute duty to disclose all assets to the Bankruptcy Court pursuant to various statutes in the Bankruptcy Code. Further, that based upon the purposes of bankruptcy:

  “[W]hen a bankruptcy court – which must protect the interest of all creditors – approves a payment from the bankruptcy estate on the basis of a party’s assertion of a given position that in our view is sufficient ‘judicial acceptance’ to estop the party from later advancing an inconsistent position.” [Citations omitted.]. Id. At 479.

The omission to list property or the true value assets is viewed as very significant when compared to the purpose of bankruptcy law. The White court specifically noted:

    “[T]he disclosure obligations of consumer debtors are at the very core of the bankruptcy process and meeting these obligations is part of the price that debtors pay in receiving the bankruptcy discharge. [Citations Omitted.] Viewed against the backdrop of the bankruptcy system and the ends it seeks to achieve, the importance of the disclosure duty can not be over emphasized. Id. At 480.

 
Dismissal of a significant claim was a drastic remedy. However, it was a remedy necessary to protect the bankruptcy court system. Had Mrs. White disclosed the Trustee might have brought the claim and any settlement or judgment could have been used to pay her creditors which would have got her out of her plan sooner, helping her and her creditors. When you and your bankruptcy lawyer file a petition for bankruptcy, yours assets (subject to proper exemptions) are no longer yours. The trustee has a right to bring those cases for the benefit of all administrative claimants and creditors. If all these folks get paid and there is money left over, the debtor will receive the balance.

The importance of the disclosure duty can not be over emphasized. Be sure to disclose all potential claims with your bankruptcy attorney. Otherwise, you will jeopardize your fresh start.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in the city of Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
May 8, 2012
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Bankruptcy Cases in the News

Bankruptcy Cases in the News

Judge Thomas Tucker of the U.S. Bankruptcy Court for the Eastern District of Michigan recently issued an interesting and important decision in the Mehlhose case (11-64190), the lengthy opinion discusses, among other things, the inherent power of the Bankruptcy Court to sanction (punish) debtors who do not play by the rules and make dishonest disclosures. In this case the Court determined that the husband-wife debtors had significantly under reported their income and filed their case in bad faith otherwise. Specifically, Judge Tucker determined that the debtors “lied under oath” concerning their income and filed a case that could not serve a legitimate purpose as they had or should have known that their particular debts were non-dischargeable. Consequently, it was determined that the case was filed in bad faith and merely for delay. The Court set up an evidentiary hearing that the debtors did not appear to testify and explain their actions. Judge Tucker noted that a Bankruptcy Court has both the inherent and the statutory authority to sanction misconduct:

In John Richards Home Bldg. Co., L.L.C. v. Adell (In re John Richards Homes Bldg. Co., L.L.C.), 404 B.R. 220, 226-27 (E.D. Mich. 2009), the court discusses the scope of a bankruptcy court’s inherent power to issue sanctions as follows:

    Bankruptcy Courts, like all courts, have an inherent power to issue sanctions, as explained by the Untied States Supreme Court in the Chambers case. See Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S.Ct. 2123, 115 L. Ed. 2d 27 (1991) (“Courts of justice are universally acknowledged to be vested, by their creation with power to impose silence, respect, and decorum, in their presence, and submissions to their lawful mandates.” (Quoting Anderson v. Dunn, 19 U.S. 204, 6 Wheat. 204, 227, 5 L.Ed. 242 (1821)). The Sixth Circuit Court of Appeals has similarly stated that “[b]ankruptcy courts, like Article III courts, enjoy inherent power to sanction parties for improper conduct.” Mapother & Mapother, P.S.C. v. Cooper (In re Downs), 103 F. 3d 472, 477 (6th Cir. 1996). … [T]he inherent power to issue sanctions is not limited to only those instances where a party violates a court order. “The federal courts’ inherent power to protect the orderly administration of justice and to maintain the authority and dignity of the court extends to a full range of litigation abuses.” Mitan v. Int’l Fid. Ins. Co., 23 Fed. Appx. 292, 298 (6th Cir. 2001) (ruling that a court can award sanctions “when bad faith occurs”).

In addition to a bankruptcy court’s inherent authority to sanction misconduct, 11 U.S.C. § 105(a) provides a bankruptcy court with statutory authority to do so. It provides:

(a)The court may issue any order, process, or judgment that is necessary;or appropriate to carry out the provisions of this title. No provisions of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.

In the end, the Court noted that sanctions would well include attorney fees. Debtors were sanctions by having their case dismissed, being ordered to pay reasonable attorney fees and costs and having been barred from refilling for 2 years. In filing your case, make sure to make complete and honest disclosures of debts, assets and income to the court, trustee and your creditors.

That is the trade-off. To obtain a discharge and a fresh start, the debtor must make an honest and full disclosure. Do not jeopardize your life or liberty and fresh start.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in the city of Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

 

Posted:
April 16, 2012
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Bankruptcy Cases in the News

Bankruptcy Cases in the News

In past blogs we have discussed the importance of the automatic stay, 11 USC 362 to the debtors fresh start and efforts to reorganize and get on with their lives. In a recently decided case from the U.S. Bankruptcy Court Eastern District of Louisiana, Judge Magner traced the importance of the automatic stay to debtors and severely punished a secured creditor, Wells Fargo (WF), for violating it. In this Chapter 13 case the judge found that WF willfully violated 11 USC 362, the automatic stay when it:

 

“Charged Debtor’s account with unreasonable fees and costs; failed to notify Debtor that any of these post-petition charges were being added to his account; failed to seek Court approval for the same; and paid itself out of estate funds delivered to it for payment of other debt.”

 

Accordingly in this case Michael L. Jones v. Wells Fargo Mortgage, Inc., 06-1093 (Eastern District of Louisiana) the court determined that there were very serious violations. As discussed in other blogs, the automatic stay is a central feature in assuring that the debtor gets a fresh start. In their case the creditor’s actions failed to allow the debtor a fresh start by wrongfully misapplying his payments to penalties, late fees and other costs WF was not entitled to.

 

In addition to the wrongful conduct WF apparently never conceded its violation but dug in and over litigated and filed appeals with dubious merit. The Court also believed that WF had treated other debtors wrongfully, too, in other cases. Therefore, Judge Magner held that not only were full compensatory damages due to debtor for all loses and attorney fees, but also punitive damages too. The opinion stated, in part:

 

“Section 362(k) allows for the award of actual damages, including costs and attorneys’ fees, as a result of a stay violation, and punitive damages “in appropriate circumstances.” Punitive damages are warranted when the conduct in question is willful and egregious, or when the defendant acted “with actual knowledge that he was violating the federally protected right or with reckless disregard of whether he was doing so.” There is no question that Wells Fargo’s conduct was willful. As previously decided Wells Fargo clearly knows of Debtor’s pending bankruptcy and was represented by bankruptcy counsel in the case. Wells Fargo is a sophisticated lender with thousands of claims in bankruptcy cases pending throughout the country and is familiar with the provisions of the Bankruptcy Code, particularly those regarding the automatic stay.”

 

Judge Magner under the egregious circumstances of the case awarded to debtor $3,170,000.00 in punitive damages. This was done because WF’s behavior was reprehensible having caused 5 years of litigation; and, clandestine hiding its misconduct and failing to make voluntary corrections of its errors. It demonstrated “an arrogant defiance of Federal law.”
The Judge determined that based on all the circumstances that such a large award should be imposed to discourage future misconduct and benefit society at large. Judge Magner noted that the award might also deter others tempted to misconduct in the absence of such a deterrent.

If creditors harass you during your bankruptcy, or after, you should seek legal help immediately.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in the city of Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

 

Posted:
April 13, 2012
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Employment Law in the News

Employment Law in the News


    The New York Times reported on March 21, 2012 that FedEx settled a case for $3,000,000.00 which alleged discrimination against applicants for employment by unlawful considerations of sex, race and gender being used in the hiring process.

In Michigan the legislature enacted the Elliott Larsen Civil Rights Act (ELCRA) which makes it unlawful to discriminate in hiring, employment opportunities and/or termination based upon race, gender, age, weight, handicap and national origin. In Michigan an aggrieved employee may either sue under the ELCRA or the federal statute.

 

Also, the Sacramento Bee reported on March 26, 2012 that Aaron’s Rentals settled a sexual harassment lawsuit for $6,000,000.00. In Michigan an employee has a right to work in an environment that is free of sexual harassment. Where co-workers or management engage in sexual misconduct in un-welcomed and (usually) repeated sexual conduct, the adversely affected employee may have a cause of action for sexual harassment.

Guy Vining has practiced law throughout the state of Michigan. His office is in the city of Taylor, Michigan, where he primarily serves the Metro-Detroit area. He has represented employers and employees in employment litigation in the trial court and the appellate courts in the following areas: whistleblower, breach of contract, public policy, discrimination, wage and hour violation, covenants not to compete, Americans with disabilities action and retaliation

Posted:
April 13, 2012
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Employment Law: Non-Competition Agreements

Employment Law

 

Non-Competition Agreements

#1

Guy Vining of the Vining Law Group, PLC, has extensive experience in representing both employers and employees in drafting and litigating employment agreements and non-competition agreements. This experience dates back to 1998 in a Genesee County matter in which he successfully assisted an employee in avoiding an injunction which would have prohibited him from working in his chosen field/occupation for 2 years within 100 miles of his former position.

It is very interesting to note that it was not many years ago when such contracts were absolutely illegal! The courts refused to enforce them because they were considered against “public policy.” After all, such contracts were restrictive of trades, business and pursuit of free competition, foundations of the free enterprise system, and all things American.

 

That changed with the enactment of so-called Michigan Anti-Trust Reform Act (MARA). Although MARA has a dignified name the impact of it was to allow non-competition agreements to protect established business from their employees. As in all things, the outer limits have been tested and many times employers have pushed too far and tried to obtain concessions which are sometimes draconian and many times, in reality, unnecessary. The touch-stone therefore of MARA is that a non-competition agreement will be enforceable if reasonable, as to:

 

  1. Reference an employer’s reasonable competitive business interests;
  2. Reasonableness in duration, area and time; and,
  3. Reasonable in light of the circumstances under which it is made.

 

In particular, MCLA 445.774a provides as follows:

     Sec. 4a. (1) an employer may obtain from an employee an agreement or covenant which protects an employer’s reasonable competitive business interests and expressly prohibits an employee from engaging in employment or a line of business after termination for employment if the agreement or covenant is reasonable as to its duration, geographical area, and type of employment or line of business. To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.

 

As an employer, one should be reasonable in analyzing the need for protection, the actual job duties, whether there really is any confidential matter to be protected and the extent of the protection really required. With these considerations in mind your lawyer can tailor an agreement which will be enforceable and accomplish real protection. Over kill will likely antagonize a judge and any good to be gained may be lost from the over reaching.

If you are an employer seeking to draft or enforce a non-competition agreement VLG can help you. Conversely, if you are and employee and need to defend against a non-competition agreement VLG will be able to assist you, as well.

Guy Vining has practiced law throughout the state of Michigan. His office is located in the city of Taylor, Michigan, where he primarily serves the Metro-Detroit area. He has represented employers and employees in employment litigation in the trial court and the appellate courts in the following areas: whistleblower, breach of contract, public policy, discrimination, wage and hour violation, covenants not to compete, Americans with disabilities action and retaliation

Posted:
April 11, 2012
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Employment Law in the News

Employment Law in the News

From time to time Guy Vining of Vining Law Group, PLC, (VLG) has both prosecuted and defended employment law claims for individual clients and various corporate clients. Employment law cases generally are very difficult because they are factually intensive requiring the review of many documents and the interviewing or deposing of multiple witnesses. Unlike a traffic accident case where the question might simply be: red light or green light?; the employment case may span many years and many incidents or events.

A great deal of care should be employed in determining who to hire to represent you in your employment law case. These cases require meticulous preparation and tenacity in advancing or defending the case. Past trial experience, good abilities at legal research, writing and trial practices are a must. Moreover, your attorney needs to have life experience and understand how witnesses and jurors see things.

Guy Vining offers a free telephone consultation with respect to employment law cases. In the event that he can help you with a particular matter he will set up an appointment to discuss the matter in greater detail. Since Mr. Vining has been helping people with these kinds of matters since 1982 he will be able to appropriately analyze your case. Please call for free to discuss yours at 734.281.2050. He has experience in prosecuting and defending sexual harassment cases; whistleblower cases; terminations in violation of public policy cases; and, general discrimination matters, including retaliation cases.

Guy Vining has practiced law throughout the state of Michigan. His office is located in the city of Taylor, Michigan, where he primarily serves the Metro-Detroit area. He has represented employers and employees in employment litigation in the trial court and the appellate courts in the following areas: whistleblower, breach of contract, public policy, discrimination, wage and hour violation, covenants not to compete, Americans with disabilities action and retaliation

Posted:
April 9, 2012
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Bankruptcy Cases in the News

Bankruptcy Cases in the News


A recent 6th Circuit Court of Appeals Case (unpublished), in re: Tammy Martin, No. 11-8052 revisited and highlighted several important aspects of bankruptcy protections for debtors. In this interesting case the debtor was awarded significant attorney fees for creditor collection actions which continued post filing and post discharge. The Court began it’s analysis by discussing 11 USC 524(a)(2) and stating:

 

    “Section 524(a)(2) of the Bankruptcy Code provides that a 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… debt [discharge under section 727… of this title] as a personal liability of the debtor, whether or not discharge of such debt is waived.” 11 USC § 524(a) (2). The subsection, along with 11 USC § 524(a) (3), is commonly referred to as the “discharge injunction.” As the Ninth Circuit recognized,

 

        The discharge injunction [comes] into force by operation of law upon entry of the discharge. A discharge injunction …is … an equitable remedy precluding the creditor, on pain of contempt, from taking any actions to enforce the discharged debt.

Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193, 1200 (9th Cir. 2008), aff’d, 130 S. Ct. 1367 (2010) (internal citations omitted). Once a discharge issued, § 524(a) (2) and (3) makes permanent the protections afforded by § 362’s automatic stay and prohibits a creditor from pursuing collection efforts against the debtor personally for debts that were discharged in the bankruptcy proceeding. Gunter v. O’Brien & Assoc. Co., LPA (In re Gunter), 389 B.R. 67, 71 (Bankr. S.D. Ohio 2008). “The purpose of § 524(a) is to afford a debtor a ‘fresh start’ by ensuring that a debtor will not be pressured in any way to repay a debt after it has been discharged.” Paglia v. Sky Bank (In re Paglia), 302 B.R. 162, 166 (Bankr. W.D. Pa. 2003).”

The Court noted that the creditor’s post discharge actions were willful. In other words, the creditor deliberately acted with [actual] knowledge of the bankruptcy case. It noted that a creditor does not have a defense of ‘mistake’ or ‘good faith belief’ that its actions were lawful. Although the creditor would have a defense if the debt was properly reaffirmed or negotiated in a valid, and new post discharge contract.

Since the creditor did not have a viable defense the Court of Appeals affirmed (upheld) the decision of the Bankruptcy Court in determining the creditor was in contempt of court and subject to sanctions of money damages. The debtor was therefore entitled to have her incidental expenses and all reasonable attorney fees paid.

The case illustrates the protection of the Bankruptcy Court through its automatic stay provisions, 11 USC 362, during pendency of a case; and, the power of the Court to protect the debtor’s fresh start. If a creditor has harassed you during the pendency of your case or post discharge you should contact a bankruptcy attorney so that the action may be reviewed as to whether it constitutes contempt of the court.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office is in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

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