Folkerts v. Seterus, Inc.
1:17-cv-04171
N.D. Ill.Sep 11, 2017Background
- In July 2009 Bank of America made a mortgage loan to Dennis and Janet Folkerts secured by their Manteno, Illinois home.
- In July 2015 the Folkerts filed a voluntary Chapter 13 bankruptcy and proposed to surrender the residence as full satisfaction of the secured claim.
- During the Chapter 13 plan the mortgage went into default and the debt was later assigned to Seterus, Inc. for collection.
- The bankruptcy court entered a discharge on February 22, 2016. Plaintiffs allege Seterus attempted to collect the discharged debt and continued to report a foreclosure to credit bureaus.
- Plaintiffs sued in district court asserting TCPA, FDCPA, FCRA, defamation, and claims for violation of the automatic stay and discharge injunction; they later voluntarily dismissed the defamation claim.
- Seterus moved to partially dismiss, arguing claims to enforce the bankruptcy stay/discharge must be brought in bankruptcy court; the district court granted that portion of the motion and left remaining claims for answer and discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs may bring claims in district court to enforce the bankruptcy automatic stay and discharge injunction | Folkerts contended Seterus attempted to collect on discharged debt and district court can hear related claims | Seterus argued enforcement of Section 524(a)(2) must be pursued in the bankruptcy court where discharge was entered | Court held Folkerts cannot enforce the discharge/automatic stay in district court; such claims must be brought in the bankruptcy court and dismissed from this action |
Key Cases Cited
- Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732 (7th Cir. 2014) (standards for Rule 12(b)(6) motions)
- Hill v. Serv. Emp. Int’l Union, 850 F.3d 861 (7th Cir. 2017) (federal pleading standard principles)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (complaint must state plausible claim)
- Roberts v. City of Chicago, 817 F.3d 561 (7th Cir. 2016) (courts accept well-pleaded facts and draw inferences for plaintiffs)
- Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir. 2004) (enforcement of discharge injunction must proceed in bankruptcy court)
- Cox v. Zale Delaware, Inc., 239 F.3d 910 (7th Cir. 2001) (same)
- Gagnon v. JPMorgan Chase Bank, N.A., 563 B.R. 835 (N.D. Ill. 2017) (district courts have held discharge enforcement belongs in bankruptcy court)