563 B.R. 127
Bankr. D.P.R.2017Background
- Debtor filed Chapter 7 on June 5, 2010, received a discharge Sept. 14, 2010, and the trustee abandoned the Palmas del Mar property as of July 2010.
- Mortgage deed (2005) and deed of modification (filed for recording 2010) had been presented to the Property Registrar pre‑petition but were not recorded until April 27, 2012.
- Banco Popular (BPPR) sued in state court for collection and foreclosure (filed Nov. 10, 2010); state court denied BPPR’s attachment request because title remained registered to the developer and not the debtor.
- DLJ (assignee) and servicer SPS sent 17 mortgage‑related communications (monthly statements, escrow analyses, and flood‑insurance notices) from March 2014–Sept. 2015 while a second Chapter 13 case (Mar. 2014–Mar. 2016) was pending and foreclosure proceedings were stayed.
- Debtor sued for violation of the §524 discharge injunction, claiming (1) the post‑discharge recording could not “relate back” given state‑court findings, and (2) the servicer’s letters were disguised collection attempts.
- The bankruptcy court denied Debtor’s summary‑judgment motion and held DLJ/SPS did not violate the discharge injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether creditor’s prepetition mortgage interest survived discharge though recording occurred post‑petition | Debtor: recording after discharge cannot benefit creditor because state court rulings and failure to cure registry defects interrupt “relate back,” leaving debt discharged | Defendants: mortgage was presented prepetition and Puerto Rico law + §§362(b)(3), 544(a), 546(b) permit relation‑back; lien survived discharge | Held: Lien survived; BPPR/DLJ’s foreclosure on an unavoided prepetition secured claim did not violate §524(a)(2) |
| Whether filing/continuing state foreclosure or attachment violated discharge injunction | Debtor: state filings and motions (including Rule 56.4 attachment) were attempts to collect personally on discharged debt | Defendants: foreclosure enforces in rem rights over surviving lien; state court denied attachment and eventual recording did not violate discharge | Held: State foreclosure activity enforcing an unavoided secured lien did not violate the discharge injunction |
| Whether monthly statements, escrow analyses, and flood‑insurance letters were prohibited attempts to collect discharged personal debt | Debtor: communications were thinly disguised collection letters (payment coupons, payee name, reference to amounts) intended to harass/collect | Defendants: communications were informational, contained bold disclaimers (“NOT AN ATTEMPT TO COLLECT A DEBT”), complied with servicing rules/Reg. Z obligations, and related to protection or accounting for secured collateral | Held: Communications were informational and not objectively coercive; sending them did not violate §524(a)(2) |
| Whether cumulative effect of multiple communications over time amounted to coercion or harassment | Debtor: even if each piece is innocuous, the aggregate effect over 17 documents was coercive and intended to collect | Defendants: volume does not convert lawful, informational notices into coercive collection; context shows enforcement of in rem rights (stay, motions for relief) | Held: Cumulative effect did not constitute coercion; no willful violation found |
Key Cases Cited
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (discharge does not extinguish in rem rights of secured creditors)
- Best v. Nationstar Mortg. LLC, 540 B.R. 1 (1st Cir. BAP 2015) (servicer informational communications may not violate discharge if not attempts to collect)
- Lemieux v. America’s Servicing Co. (In re Lemieux), 520 B.R. 361 (Bankr. D. Mass. 2014) (monthly statements with disclaimers may be informational, not coercive)
- Pratt v. GMAC (In re Pratt), 462 F.3d 14 (1st Cir. 2006) (discharge‑injunction coercion standard; objective test)
- Canning v. United States (In re Canning), 706 F.3d 64 (1st Cir. 2013) (sanctions for discharge violations are civil contempt remedies)
- Nordlund (In re Nordlund), 494 B.R. 507 (Bankr. E.D. Cal. 2013) (monthly statements that include clear disclaimers are not attempts to collect discharged debt)