In 2010, the debtor received a discharge in his chapter 7 case. After the court issued the injunction, the mortgage holder attempted by mail and phone to collect three years of payments from the debtor. The mortgage company threatened that the failure to pay would result in reports to the credit agency. As a result, the debtor filed an action against the mortgage company for violating the provisions within the discharge injunction, seeking compensatory and punitive damages.
A discharge injunction protects the debtor from creditors attempting to recover debts that have been settled under bankruptcy law. Because of the importance of a discharge injunction, violations are treated with serious consequences. Although the Bankruptcy Code does not specifically provide for monetary awards, courts have awarded monetary awards when there is a willful violation.* The court found that the mortgage company’s violations were willful and examined evidence to determine damage awards. Although the debtor was not awarded damages for mental anguish and emotional distress, the court awarded economic fees of $1,905.00 for the time the debtor spent with his attorney regarding the matter. The court also awarded a putative damage award of $500.00 per a violation, or a total of $4,500.00, because it found the phone calls and letters constituted willful and egregious violations. Lastly, the court awarded a total of $65,512.69 in attorney fees, which was disproportionate to the economic damages, still considered to be reasonable to ensure compliance with discharge injunctions.
Creditors should review each debt to make sure it was not discharged if a debtor files for bankruptcy. If an injunction is present, creditors should not contact the debtor because that contact may be costly and unbeneficial. Conversely, attorneys should note that even if an economic damage award is low, courts will award reasonable attorney fees when a discharge violation is willful and egregious.
* “To support finding a willful violation of §524(a)(2), the offending creditor must ‘(1) know the injunction has been entered, and (2) intend [ ] the actions that violate it.’”