Violation of Discharge Injunction - Even Though Agreement Indicated Debt Would Not be Discharged 9th Cir. BAP - Unpublished

In an unpublished 9th Cir. BAP decision, the Court analyzed, what we all should know, is that a debt is discharged even though a contract indicated that if the debtor filed bankruptcy, the underlying debt would not be discharged.  The Creditor was well aware of the Bankruptcy, the discharge order but still filed suit in small claims to obtain a monetary judgment.  The Bankruptcy Court found that the Creditor did not subjectively know the injunction applied to him.  The BAP reversed such finding but remanded the case back for a trial on damages (the debtor never proved up actual damages).

Of particular note is that this was an adversary proceeding but violations of discharge injunctions must be done by motion.  The BAP instructed the BK Court to treat the adversary proceeding as a contested proceeding.  Some fairly good case law was cited in this 20 page decision (pro se v. attorney)

12-27-13 Chionis - 9th Cir BAP

Las Vegas Bankruptcy Judge - Holds Creditor and Law Firm in Contempt

In an unpublished decision (In re Grihalva 2013 WL 5311227), Chief Bankruptcy Judge Mike K. Nakagawa held parties in contempt for violating the discharge injunction.  The creditors filed a judicial foreclosure action but in its prayer sought judgment only against the Debtor for over $584,000, costs and fees. However, within the complaint the Creditor indicated that no deficiency judgment will be sought against the Debtor. 

The Court found that the creditor and its counsel placed the debtor in an untenable position by engaging in conduct inconsistent with the discharge.  Since the creditor never amended the complaint after being put on notice, the violation of the discharge injunction was continuing. 

The Court found both counsel and the creditor jointly and severally liable for $5919.90 and a fine of $10,000.00.