519 B.R. 1
Bankr. D.P.R.2014Background
- Co-debtor Josephine Barnes‑Adams renewed a $10,600 loan with Puerto Rico Federal Credit Union (PRFCU) on July 8, 2011; PRFCU represented the loan was guaranteed by a savings certificate in the name of Norma Adams‑Irizarry (the Guarantor).
- Plaintiffs (joint debtors) filed Chapter 7 on January 29, 2012 and received a discharge on May 9, 2012; PRFCU had notice of the bankruptcy and discharge.
- The Guarantor signed a Pignoration and Authorization Document at PRFCU on March 2, 2012 (post‑petition). PRFCU had earlier certified the Guarantor’s certificate as guarantying the loan.
- In July 2012 PRFCU sent a payment booklet addressed to Barnes‑Adams to the Guarantor’s home address, requesting payment on the discharged loan.
- Plaintiffs sued asserting (1) violation of the automatic stay (11 U.S.C. § 362) based on the Guarantor’s post‑petition signature and other collection acts, and (2) violation of the discharge injunction (11 U.S.C. § 524) based on PRFCU’s July 2012 mailing; PRFCU moved for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the automatic stay protects the non‑debtor guarantor from post‑petition acts | Guarantor is a party‑in‑interest entitled to stay protection and damages under §1109 and §362(k) | Automatic stay protects only the debtor and estate; does not extend to non‑debtor guarantors (no extension sought under §362) | Denied relief for Guarantor: automatic stay does not apply to non‑debtor guarantor; claims to void post‑petition document under §362 dismissed |
| Whether PRFCU’s post‑petition obtaining of guarantor’s signature voids under §362 | Signature was a prohibited post‑petition perfection/collection act | Guarantor not protected; no stay violation | Court dismissed claims based on post‑petition signature (no stay protection) |
| Whether PRFCU violated the discharge injunction by sending collection materials to debtor at guarantor’s address | Sending payment booklet to debtor (even via relative) pressures debtor; §524 broadly prohibits collection acts directed at debtor or through relatives | Discharge does not affect third‑party liability; Guarantor remains liable so communications to third parties are permissible | Court held PRFCU violated §524 by sending payment booklet to debtor at Guarantor’s address; discharge‑injunction claim survives |
| Remedy/proceedings remaining | Plaintiffs seek damages, fees, and voiding collateral | PRFCU seeks complete summary judgment | Summary judgment partially granted (stay claims dismissed); denied as to discharge violation; pretrial set for damages on §524 violation |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Austin v. Unarco Indus., 705 F.2d 1 (1st Cir. 1983) (§362 applies to bankrupt debtor only)
- Fleet Mortgage Group v. Kaneb, 196 F.3d 265 (1st Cir. 1999) (standard for willful violation of stay/discharge: knowledge + intent to act)
- Federal Deposit Ins. Corp. v. Ponce, 904 F.2d 740 (1st Cir. 1990) (§524(e) preserves guarantor liability)
- Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439 (1st Cir. 2000) (discharge injunction and enforcement mechanisms)