Why creditors should be held accountable for discharge violations

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10th Oct 2012

When a creditor tries to collect a debt that was discharged in bankruptcy, it is (and should be) treated as a serious violation of the debtor’s rights. When that collection effort rises to the level of causing emotional distress, then the debtor should be compensated for the damage caused by the creditor. Judge Clark said it best:

“The whole premise of affording debtors a discharge in bankruptcy is to afford the honest debtor a fresh start. A creditor who violates the discharge tramples on the promise Congress made to its citizenry. Little wonder that emotional distress is (and ought to be) a significant component of damages for discharge violations. A debtor who is promised a fresh start is hardly made whole by an order which simply repeats what the statutory injunction already says — stop all further efforts at collection activity. A significant component of the fresh start is being free of the kinds of harassment, threats, and anxiety that debtors were suffering before they filed. Threats and harassment are the first and most effective collection devices most creditors employ — far more prevalent and far more cost-effective than formal litigation. These methods work precisely because they inflict emotional distress on debtors, at a sufficient level of pain to motivate debtors to pay money to the creditor to make the pain stop. Outside of bankruptcy, inflicting that pain as a means of debt collection is legitimate (within the parameters of other legal limitations). Once the debtor receives a discharge in bankruptcy, however, that particularly painful device for debt collection is supposed to stop. When a creditor insists on continuing to inflict the same painful methods on a debtor in contempt of Congress’ injunction, they must now compensate for the damages caused — and those damages are real. Indeed, no one knows that better than the creditors themselves. They know they are inflicting pain, because they know that’s what motivates debtors to pay them to make them go away.”

In re Gervin (337 BR 854 – Bankr. Court, WD Texas, 2005)

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