The matter before the Court arises as a result of a motion for an injunction filed by the debtor, Leroy Mickens, Jr. (herein Debt- or) against the Waynesboro Dupont Employees Credit Union (herein Credit Union) for its violation of 11 U.S.C. § 524(a)(2). 1 For the reasons stated in this decision and order the Court finds that the Credit Union violated the post-discharge injunctiоn and is liable for damages, attorney’s fees and costs.
Facts:
The uncontested facts in this case show that, on or about May 6, 1994, Debtor, Richie’ Mickens and Mary Terrill executed a note in favor of Credit Union’s predecessor, Staunton Employees Credit Union. 2 On December 20, 1995, Debtor filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Western District of Virginia, Harrisonburg Division. The Credit Union was listed as a creditor on Debtor’s petition. Leroy Mickens received a Chapter 7 discharge on April 8, 1996. Thereafter, the Credit Union initiated collection efforts against Mary Terrill. To resolve the collection action, Ms. Terrill requested that the Credit Union permit her to sign a new obligation and was informed that she would need a cosigner.
The parties’ accounts of the facts differ as to whether employees of the Credit Union actively encouraged or merely facilitated Debtor’s eosigning a new obligation for the discharged debt. Debtor alleges that Kеvin Lounsbury and Robert W. Tyson, employees of Credit Union, insisted to Mary Terrill that, in order to relieve her of the burden of the collection effort by refinancing the indebtedness, a new note must be cosigned by Debtor and his wife. By contrast Lounsbury and Tyson state that, when contacted by Terrill, Tyson advised her that she would be
On March 28, 1997, the Credit Union received, processed, and approved an application by Terrill, the Debtor, and Richie’ Mick-ens. The Credit Union emphasizes the fact that Terrill, Debtor, and Richie’ Mickens voluntarily came to its place of business and voluntarily signed the new note and that Debtor and Richie’ Mickens voluntarily signed the Notice to Cosigner. Lounsbury and Tyson insist they put no pressure on Debtor and his act of cosigning was voluntary. Debtor alleges he felt he had no option but to sign the new note.
Law and Discussion:
A. Violation of § 524(a)(2).
11 U.S.C. § 524(a)(2) imposes an injunction after the issuance of the discharge order “against the commencement or continuatiоn of an action, the employment of process, or an act, to collect, recover, or offset any such debt as personal liability of the debtor, whether or not discharge of such debt is waived.” Therefore, the resolution of this case does not depend upon the Debtor’s awareness of his rights or whethеr the Credit Union insisted upon Debtor cosigning the note. The issue is whether the fact that the Credit Union obtained a new note signed by the Debtor for his discharged obligation constitutes “an act, to collect, recover, or offset” the discharged debt in violation of the discharge injunction.
In order to determine whether the discharge injunction contained in § 524(a)(2) was violated by the Credit Union, the Court must determine whether the Credit Union’s actions constituted “an act” which is prohibited. Although the Bankruptcy Code does not define “an act”, Congressional intent is revealed in the legislative history:
Subsection (a) specifies that a discharge in a bankruptcy case ... оperates as an injunction against the. commencement or continuation of an action, the employment of process, or any act, including telephone calls, letters, and personal contacts, to collect, recover, or offset any discharged debt as a personal liability of the dеbtor ... whether or not the debtor has waived discharge of the debt involved. The injunction is to give complete effect to the discharge and to eliminate any doubt concerning the effect of the discharge as a total prohibition on debt collection efforts. This paragraph has been expanded over a comparable provision in Bankruptcy Act § 14f to cover any act to collect, such as dunning by telephone or letter, or indirectly through friends, relatives, or employers, harassment, threats of repossession, and the like. The change ... is intended to insure that once a debt is discharged, the debtor will not be prеssured in any way to repay it. In effect, the discharge extinguishes the debt, and creditors may not attempt to avoid that. S.Rep. No. 95-989, at 80 (1978).
From this passage, it appears clear that Congress intended a broad, if not catch-all, definition of “an act.”
Case law defining “an act” for the purposes of § 524(a)(2) is limited.
Matter of Holland,
In this case, the Credit Union’s act, permitting Debtor to cosign the new note, expressly placed Debtor in the same state of personal liability for the exact debt which was discharged. The Notice to Cosigner states this fact.
If the borrower doesn’t pay this debt, you will have to.... You may have tо pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection cost, which increase this amount.
The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection mеthods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record. Debt- or’s Motion, Appendix B.
Section 524(c) lays out detailed requirements which must be met for a debtor to reaffirm a pre-petition debt and thereby remain obligated to pay such a debt in spite of the discharge injunction. 4 That section applies by its terms to “[a]n agreement between a holder of a claim and the debtor, the consideration for which ... is based on a debt that is dischargeable in a case under this title_” 11 U.S.C. § 524(c). If special procedures (reaffirmation) must be followed to allow an act (the creation of an agreement where a dischargeable debt serves as consideration) in spite of the discharge injunction, then, the act must be one which is subject to the discharge injunction of § 524(a)(2). 5 It seems clear that Credit Union’s actions would be subject to § 524(c). Therefore, they must fall within the definition of “an act” for the purрoses of the discharge injunction, however narrowly that phrase may be defined. There can be little doubt this was “an act, to collect, recover or offset” the discharged debt “as a personal liability of the debtor.” 6
While no cases with identical facts are readily apparent, the cases which most closely resemble the fact pattern for this case are those which involve “clumsy attempts to avoid the injunction.”
7
David G. Epstein,
In this case, the Credit Union cannot make any serious argument its actions or new note even attempt to comply with the requirements of § 524(c) and (d). However, it appears from Credit Union’s emphasis on the voluntary nature of Debtor’s act that Credit Union hopes for a § 524(f) defense. Clearly, allowing a debtоr to sign a note which places him under the same obligation which he was subject to pre-discharge does not constitute a voluntary repayment by the debtor nor does it leave the debtor in position to make a voluntary repayment under § 524(f).
B. Sanctions for violation of 11 U.S.C. § 524(a)(2).
“Violation of the injunction is punishable by contempt.”
Matter of Holland,
Courts also read § 105 “as authorizing punitive sanctions, which are simply anothеr mechanism by which the court enforces its orders.” Id. at 333 (citations omitted). “Punitive sanctions, though imposed as punishment after the fact, nonetheless enforce court orders by their very availability and the threat of their imposition for violations of such orders.” Id. “Moreover ... the weight of authority from other circuits now recognizes that the bankruptcy court has authority to enforce its own orders in core proceedings by the power of both civil and criminal contempt.” Id. (footnotes omitted). “A proceeding to enforce the discharge is a core proceeding.” Id. at 332 (citations omitted).
In this case, there can be no doubt Credit Union was aware оf the injunction and intentionally permitted and facilitated Debt- or’s signing a new note which returned him to his pre-petition position of personal liability for the pre-petition debt. Such action constitutes a willful violation of the post-discharge injunction of § 524(a)(2).
C. Damages.
Debtor provided no evidence of his damages or the attоrney’s fees incurred in connection with this effort to stop the violation of the discharge order. Accordingly, it is
ORDERED:
That, Waynesboro Dupont Employees Credit Union, Inc. be, and it hereby is found in VIOLATION of the discharge injunction imposed by 11 U.S.C. § 524(a)(2). The liability of Leroy Mickens, Jr. on the note he eosigned for Mary Terrill is VOID ab initio. Further, the Credit Union is LIABLE to Leroy Mickens, Jr. for damages, attorney’s fees, and costs. It is
FURTHER ORDERED:
That Debtor shall, within twenty (20) days from the date of the entry of this order file with the Court an affidavit of damages sustained and attorney’s fees and costs incurred, the latter to be in the form customarily presented in connection with applications for compensation of counsel, аnd any request for punitive damages if he believes such damages are appropriate. Thereafter, Credit Union shall have fifteen (15) days to file any response to the itemized damages and attorney’s fees and costs as well as any response to any request for punitive damages.
Copies of this order arе directed to be mailed to David I. McCaskey, Esquire, 24 W. Beverley Street, P.O. Box 1134, Staunton, Virginia 24402-1134, counsel to Debtor; and to Charles L. Ricketts, III, Allen & Carwile, P.C., P.O. Drawer 1558, Waynesboro, Virginia 22980, counsel to Credit Union.
Notes
. (a) A discharge in a case under this title—
(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived.
. Richie Mickens is Debtor’s wife. Mary Terrill is a friend of the Mickens and lives in Charlottes-ville, Virginia. She cosigned the Credit Union note because the Credit Union required that the Mickens provide a cosigner.
. More recently, "act” has been defined in Black’s Law Dictionary 25 (6th ed.1990) as "[djenotes external manifestation of actor's will.” Restatement, Second, Torts § 2 ... In its most general sense, this noun signifies something done voluntarily by a person ... In a more technical sense, it means something done voluntarily by a person, and of such a nature that certain legal consequences attach to it.
. (c) An agreement between a holder of a claim and the debtor, the consideration for which, in whole or in part, is based on a debt that is dischargeable in a case under this title is enforceable only to any extent enforceable under applicable nonbankruptcy law, whether or not discharge of such debt is waived, only if ...
. Section 524(a)(2) and (c) are
in pari materia
and should be read as complimentary.
In re Briggs,
. Far less blatant commissions or omissions have been found to constitute acts to collect a discharged debt by other courts.
See In re Roush,
. See Smurzynski v. General Finance Corporation,
. (f) Nothing contained in subsection (c) or (d) of this section prevents a debtor from voluntarily repaying any debt.
. 11 U.S.C. §105
(a) The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.
.Rule 9020
(b) Other Contempt. Contempt committed in a case or proceeding pending before a bankruptcy judge ... may be determined by the bankruptcy judge only after a hearing on notice. The notice shall be in writing, shall state the essential facts constituting the contempt charged and describe the contempt as criminal or civil ...