In this case, an Ohio court awarded $15,000 against a credit union and its attorney, as well as ordering the credit union to pay debtor’s attorney fees in excess of $7,000.

Here, the debtor filed a Chapter 7 bankruptcy and listed his debts to Champion Credit Union with the bankruptcy court.

The credit union received notice of the bankruptcy, however, it did not attend the first meeting of creditors, file objections to debtor’s discharge or otherwise contest the scheduled discharge in bankruptcy.

Prior to debtor’s filing for bankruptcy, debtor owed two debts to the credit union: the first debt being a VISA charge for $1,726 and the second debt being for only $275, secured by a vehicle.

The debtor initially indicated that he would reaffirm the secured debt, but subsequently stated that he would not reaffirm the secured debt and surrendered the collateral to the credit union.

The credit union took no action and both debts were discharged by the bankruptcy court.

Thereafter, the credit union, through its attorneys, instituted a regular civil action in state court and sought possession of the vehicle.

The state court complaint also sought monetary damages against the debtor. The basis for the credit union seeking monetary damages appears to be due to the fact that the debtor had disassembled the vehicle, selling the most valuable parts to another person and retaining only the chassis which had an estimated value of $100.

The credit union obtained a judgment against the debtor in the state court for possession of the collateral and a monetary judgment against the debtor personally for the value of the collateral.

The debtor filed an action in the bankruptcy court alleging the credit union had violated the bankruptcy court’s automatic stay and permanent injunction which prohibited any creditor from proceeding against the debtor for any debts that had been discharged in bankruptcy.

The bankruptcy court found that this debt to Champion Credit Union had been discharged in bankruptcy and the credit union was only, at the most, entitled to possession of the remaining chassis.

The bankruptcy court further found that the credit union’s legal maneuvers in the state court to collect this otherwise discharged debt were outrageous. The credit union and its attorney had no conceivable right to continue against the debtor seeking a monetary judgment against this individual debtor.

Consequently, the bankruptcy court found that the credit union’s actions were intentional violations of the permanent injunction against attempts to collect a discharged debt.

The court assessed punitive damages against the credit union and its attorney of $15,000, as well as ordering the credit union to pay debtor’s legal fees in excess of $7,000. All this was done to collect $275 from the debtor. Dan Braun v. Champion Credit Union (Bankr. N.D.Ohio, Nos. 90-01336 & 91-3122).

Author: Charles R. Harroun, Attorney at Law