When a bankruptcy court discharges a debt, the creditor is supposed to stop trying to collect it from the debtor. This is not rocket science. In Texas and across the nation, it is an utterly basic part of the bankruptcy process that should be well known to creditors.
In a recent case, however, one of the country’s biggest banks kept trying to get a married couple to pay a debt that had already been discharged in a Chapter 7 bankruptcy. A bankruptcy judge has issued an order for Bank of America to pay a five-figure sum — $10,000 — every month that it continues to harass the couple.
The judge also ordered Bank of America to pay the couple’s attorneys’ fees.
Evidence in the case showed that Bank of America sent a cascade of letters and made repeated phone calls to the couple, trying to collect on a home loan. The bank did this even after the couple discharged the mortgage debt in bankruptcy.
It’s true that the bankruptcy discharge did keep open the bank’s foreclosure rights. But the bankruptcy put an end to the couples’ personal liability on the mortgage loan that the bank wrongly kept trying to collect upon.
This case was from New York, but it is not an isolated one. Bank of America has also used such impermissible tactics elsewhere in the country. In a case earlier this year in Florida, a bankruptcy judge fined Bank of America more than $200,000 for multiple violations of court orders. That case involved a mortgage modification.
Of course, Bank of America is not the only lender out there that can be a bad actor. That is one reason why debtors can benefit from the counsel of a consumer bankruptcy attorney as they seek to resolve their debts.
Source: The Wall Street Journal, “Bankruptcy Judge Sends a Message to Bank of America,” Oct. 4, 2013