Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
United States Bankruptcy Court, E.D. North Carolina,
Wilson Division.
In re Monica Ann SEXTON, Debtor.
51IV(D) Enforcement of Injunction or Stay
51k2464 k. Sanctions, in General. Most Cited Cases
Chapter 13 debtor failed to show that the creditor had knowledge that its conduct was a violation of the dis-
charge order, and thus, the creditor was not sanctioned for violating the discharge order. The creditor tried to contact
the debtor's counsel to inquire about its claim, but counsel never responded. Thereafter, the creditor sent the debtor
November 5, 2010 (the “Motion”), and the Response to Amended Motion for Sanctions filed by BRM Recovery
Services Inc. d/b/a Bankruptcy Receivables Management (“BRM”) on November 29, 2010 (the “Response”). The
Court conducted a hearing on December 14, 2010, in Wilson, North Carolina to consider the Motion and the Re-
sponse.
BACKGROUND
On June 28, 2005, the Court entered an Order Confirming the Debtor's Chapter 13 Plan (the “Original Chapter
13 Plan”). The Confirmation Order did not reference the claim of Friedman's. Subsequently, on July 3, 2005, Fried-
man's filed a secured proof of claim in the amount of $762.26. Of that amount, $300.00 was listed as secured with
an interest rate of 7.75% and $462.26 was listed as unsecured.
On October 12, 2006, and again on March 5, 2007, the Debtor moved to modify the Original Chapter 13 Plan.
Thereafter, the Debtor filed a new Chapter 13 Plan (the “Plan”), which was confirmed on April 2, 2008. The
Plan provided treatment for the claim of Friedman's as secured in the amount of $300.00, with an interest rate of
7.75%, and unsecured for the balance of $462.26.
for the District of Delaware. Over the course of the liquidation proceeding in Friedman's, Friedman's segregated its
accounts receivable and sold them.
On June 10, 2008, Merchant's Acquisition Group, LLC (“MAG”) purchased a portion of the accounts of Fried-
man's, including the Debtor's account. A year later, on June 10, 2009, MAG placed the Debtor's account with BRM.
of Friedman's at P.O. Box 8025, Savannah, Georgia 31412, which was the address listed in the schedules and on the
proof of claim. These dividend checks were not negotiated by Friedman's. Therefore, the Chapter 13 Trustee, depos-
ited the unclaimed funds into the court registry pursuant to 11 U.S.C. § 347(a). The funds are currently on deposit
with the United States Treasury.
The Debtor completed her Plan and the Court subsequently entered an Order Discharging the Debtor on March
ly. The letter stated:
[a]s a secured creditor, our client, Merchants Acquisition Group Llc (sic) still holds a contractual lien on the prop-
erty used as security for this loan and has a Purchase Money Security Interest as provided by the Uniform Com-
mercial Code, Section 9–103, in the merchandise purchased from Friedman's Jewelers described as follows: FINE
JEWELRY.
letter. The Debtor testified that she received two letters from BRM, but that she never received any telephone calls
from BRM regarding the surrender of the collateral.
On September 24, 2010, at the request of the Debtor, an order reopening the case was entered to allow the
A discharge in a bankruptcy case “operates as an injunction against ... 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....” 11 U.S.C. §
524(a)(2). The appropriate remedy for violation of the discharge injunction is a contempt action. Almond v. Ford
Motor Co. (In re Almond), 2007 WL 1345224 at *3 (Bankr.M.D.N.C.2007). Section 524(a) may be enforced
through the court's contempt power under 11 U.S.C. § 105(a). In re Bennett, 298 F.3d 1059, 1069 (9th Cir.2002).
494, 501 (7th Cir.1997); In re Rimsat, Ltd., 229 B.R. 914, 921 (Bankr.N.D.Ind.1998); Knepper v. Skekloff, 154 B.R.
75, 80 (N.D.Ind.1993).
To establish civil contempt, the movant must show by clear and convincing evidence:
(1) the existence of a valid decree of which the alleged contemnor had actual or constructive knowledge; (2) ...
that the decree was in the movant's “favor”; (3) ... that the alleged contemnor by its conduct violated the terms of
completion of her Plan (the “Discharge Order”). The Discharge Order was in the Debtor's favor in that it granted the
Debtor a discharge under 11 U.S.C. § 1328(a).
However, the facts do not establish by clear and convincing evidence that BRM violated the Discharge Order
and had knowledge that its conduct was a violation of the Discharge Order. On July 1, 2010, BRM sent a letter to
Debtor's counsel inquiring about the account of Friedman's. At the hearing, counsel for BRM stated that BRM be-
7.75%, and unsecured for the balance of $462.26.
for the District of Delaware. Over the course of the liquidation proceeding in Friedman's, Friedman's segregated its
accounts receivable and sold them.
On June 10, 2008, Merchant's Acquisition Group, LLC (“MAG”) purchased a portion of the accounts of Fried-
man's, including the Debtor's account. A year later, on June 10, 2009, MAG placed the Debtor's account with BRM.
of Friedman's at P.O. Box 8025, Savannah, Georgia 31412, which was the address listed in the schedules and on the
proof of claim. These dividend checks were not negotiated by Friedman's. Therefore, the Chapter 13 Trustee, depos-
ited the unclaimed funds into the court registry pursuant to 11 U.S.C. § 347(a). The funds are currently on deposit
with the United States Treasury.
The Debtor completed her Plan and the Court subsequently entered an Order Discharging the Debtor on March
ly. The letter stated:
[a]s a secured creditor, our client, Merchants Acquisition Group Llc (sic) still holds a contractual lien on the prop-
erty used as security for this loan and has a Purchase Money Security Interest as provided by the Uniform Com-
mercial Code, Section 9–103, in the merchandise purchased from Friedman's Jewelers described as follows: FINE
JEWELRY.
letter. The Debtor testified that she received two letters from BRM, but that she never received any telephone calls
from BRM regarding the surrender of the collateral.
On September 24, 2010, at the request of the Debtor, an order reopening the case was entered to allow the
A discharge in a bankruptcy case “operates as an injunction against ... 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....” 11 U.S.C. §
524(a)(2). The appropriate remedy for violation of the discharge injunction is a contempt action. Almond v. Ford
Motor Co. (In re Almond), 2007 WL 1345224 at *3 (Bankr.M.D.N.C.2007). Section 524(a) may be enforced
through the court's contempt power under 11 U.S.C. § 105(a). In re Bennett, 298 F.3d 1059, 1069 (9th Cir.2002).
494, 501 (7th Cir.1997); In re Rimsat, Ltd., 229 B.R. 914, 921 (Bankr.N.D.Ind.1998); Knepper v. Skekloff, 154 B.R.
75, 80 (N.D.Ind.1993).
To establish civil contempt, the movant must show by clear and convincing evidence:
(1) the existence of a valid decree of which the alleged contemnor had actual or constructive knowledge; (2) ...
that the decree was in the movant's “favor”; (3) ... that the alleged contemnor by its conduct violated the terms of
completion of her Plan (the “Discharge Order”). The Discharge Order was in the Debtor's favor in that it granted the
Debtor a discharge under 11 U.S.C. § 1328(a).
However, the facts do not establish by clear and convincing evidence that BRM violated the Discharge Order
and had knowledge that its conduct was a violation of the Discharge Order. On July 1, 2010, BRM sent a letter to
Debtor's counsel inquiring about the account of Friedman's. At the hearing, counsel for BRM stated that BRM be-
