Canning v. Beneficial Maine, Inc. (In Re Canning)
442 B.R. 165
Bankr. D. Me.2011Background
- Cannings filed Chapter 7 and listed HSBC as a creditor with a secured mortgage on their Sanford, Maine residence.
- Discharge entered on June 3, 2009; Cannings surrendered the home per their statement of intention.
- About two months post-discharge, HSBC sent a letter asserting ongoing personal liability and reserving rights under the loan.
- Cannings’ counsel replied demanding withdrawal of the payment demand and, if not, immediate foreclosure or discharge of the mortgage.
- HSBC responded inconsistently, later stating discharge of personal liability but maintaining a lien and offering settlement or short sale options.
- Property value declined significantly after filing; the house remained vacant and no foreclosure or lien release occurred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did HSBC violate discharge injunction by post-discharge dunning? | Cannings argue HSBC demanded payment post-discharge in contradiction to §524(a)(2). | HSBC contends its actions did not constitute improper collection or coercion, and thus no violation. | Yes, HSBC violated by continuing to demand payment post-discharge. |
| Did HSBC’s refusal to foreclose or release the lien violate the discharge injunction? | Cannings allege coercion by not foreclosing or releasing to allow surrender without personal liability. | HSBC argues relief of lien or foreclosure is not compelled by discharge and may be deferred. | No, refusal to foreclose or release did not violate §524(a)(2). |
| Should sanctions be awarded given the discharge injunction violation? | Seeking monetary or other sanctions for the violation of the discharge injunction. | Argument pending further evidence on sanctions, if any. | Sanctions may be addressed in a subsequent hearing; liability established for post-discharge dunning. |
Key Cases Cited
- In re Pratt, 462 F.3d 14 (1st Cir. 2006) (two-part test for contempt involving knowledge and intent; collateral impact on discharge rights)
- Bessette v. Avco Fin. Servs., 230 F.3d 439 (1st Cir. 2000) (discharge injunction scope and enforcement principles)
- In re Schlichtmann, 375 B.R. 41 (Bankr. D. Mass. 2007) (two-part contempt framework and knowledge/intent considerations)
- Project B.A.S.I.C. v. Kemp, 947 F.2d 11 (1st Cir. 1991) (contempt standards and balancing enforcement with restraint)
- Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265 (1st Cir. 1999) (burden of proof considerations in discharge-related relief)
- Foster v. Double Ranch Assn., 435 B.R. 650 (9th Cir. BAP 2010) (post-petition ownership burdens and discharge implications)