Kentucky Bankruptcy Law

Counsel with Care

Violation of the Discharge Order: What you get

I post last Friday about how to pursue a violation of the discharge order from a bankruptcy. Once contempt has been proven to the court, the question turns to sanctions. This normally involves an award of monetary damages to the Debtor to be paid by the creditor. While it seems that this part is the simple, no-brainer part, it is actually where the most care should be taken.

We need to go back to prior to re-opening the bankruptcy case to be sure to cover this topic adequately. The court is going to look to see if the Debtors’ attorney went straight to litigation as opposed to attempting to mitigate damages. My practice on this may go overboard on mitigation, but I believe the principal is sound. I always provide my clients with a copy of the discharge order and instruct them: 1) if a creditor violates the order, send them a letter and attach a copy of the order making sure to keep a copy of the letter sent, and 2) if the creditor persists, they should contact me. Once they contact me, I will again communicate the order to the creditor with a “cease and desist” letter.

If the violation involved something more than directly contacting the Debtor, though, I may alter step two. For example, if the creditor has contacted neighbors or co-workers of the Debtor to attempt to collect the debt, then the cease and desist letter would also demand monetary compensation for the Debtor. If the creditor persists, then litigation is warranted.

Now, one reason to take the approach I outlined is that the scope of damages ranges from only actual damages all the way to punitive damages. If the violation is one where a mistake was made by the creditor and then timely rectified, the court is unlikely to award punitive damages. Furthermore, if they see no signs of mitigation attempts, the court may not even award all of the attorney fees. However, if the violation is egregious then the court may impose far larger monetary awards to the Debtor. So, my approach prevents needlessly mounting attorney fees while still getting the Debtors relief.

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November 19, 2012 - Posted by | Bankruptcy, Chapter 13, Chapter 7, Debt collection, Discharge, Violation | , , , , , , , , , , , ,

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