11th Circuit Rules Monthly Debtor Service Agent Information Statements in Bankruptcy with Discharged Debts Not Attempt to Collect Debt | PC Weiner Brodsky Kider

The Eleventh Circuit ruled that monthly mortgage statements sent by a mortgage agent to a debtor whose debts have been discharged in bankruptcy do not violate the bankruptcy code’s prohibition against attempts to collect a discharged debt under 11 USC § 524.

Plaintiff’s Chapter 13 bankruptcy petition, filed in 2010, mentioned a mortgage and stated his intention to convey the property. In 2014, the bankruptcy was canceled and the mortgage agent was notified, but he did not seize the property. The discharge order stated that although the creditors had no right to collect the debt discharged, they had the right to assert valid liens on the debtor’s assets after the bankruptcy. The order also noted that the debtor had the right to voluntarily pay the amount owed on the debt and retain the property in question.

Several months after the release order, the repairer began sending statements to the plaintiff which stated that they were not debt collection attempts, but included an amount owed, a due date and instructions. of payment. Despite a cease and desist letter sent to the duty officer by plaintiff’s attorney, the statements continued; thereafter, the administrator’s communications with the plaintiff took the form of an “information statement” which again listed the amount due, due date and payment instructions.

Although the statements also contained a disclaimer stating that they were for informational purposes only and did not constitute attempts to collect debts, the plaintiff filed a motion for sanctions in her bankruptcy case. This motion was denied by the bankruptcy court and the district court, and the plaintiff appealed. On appeal, plaintiff asked the Eleventh Circuit to consider, among other things, whether the informational statement constituted a punishable violation of Section 524.

Article 524 of the bankruptcy code “operates as an injunction against the commencement or continuation” of debt collection of the discharged debt. In this case, the court determined that the administrator’s disclosure statement did not have the objective effect of pressuring the plaintiff to repay a discharged debt, because the disclaimer included in the communication made it clear and bold that it was for informational purposes only and not an attempt to collect a debt.

Since Section 524 allows a debtor to voluntarily repay a discharged debt, allowing a debtor to retain the property, the information statement had the legitimate purpose of providing the plaintiff with the information needed to repay the debt. Thus, the court concluded that the penalties were unjustified.

The court also rejected plaintiff’s argument that a “least sophisticated consumer” test applicable in the context of the FDCPA to protect consumers from improper debt collection attempts should also be applied in the context of the Section 524 of the discharged bankruptcy debt, finding no reason to use a standard FDCPA review to determine whether the disclosure statement violated the bankruptcy code.