Secured Creditor Violated Discharge Injunction by Claiming Amount in Excess of its In Rem Claim on Collateral

Secured Creditor Violated Discharge Injunction by Claiming Amount in Excess of its In Rem Claim on Collateral

On January 3, 2002, the Debtor purchased a 2003 Harley-Davidson (“Motorcycle”), signing a promissory note for the purchase price and granting a lien on the Motorcycle.

On October 14, 2005, Debtor filed a Voluntary Petition for Relief under Chapter 7 of the Bankruptcy Code (“2005 Case”). He listed the Motorcycle on his Schedule of Assets with a value of $5,000.00 and Harley as a secured creditor with a claim of $8,973.00. Debtor also stated an intention to surrender the Motorcycle to Harley.

The Chapter 7 Trustee disclaimed and abandoned the estate’s rights in the Motorcycle as being encumbered in excess of its value and, thus, not having sufficient equity to justify administration. Debtor was granted a discharge on February 21, 2006.

On July 2, 2016, Debtor filed a Voluntary Petition for Relief under Chapter 13 of the Bankruptcy Code (“Present Case”). Debtor neither listed the Motorcycle in his Schedule of Assets nor did he list Harley as a creditor.

On July 12, 2016, Harley timely filed Proof of Claim 2-1 (“Claim 2-1”) for the secured amount of $9,302.99, and then on July 25, 2016, Harley filed amended Proof of Claim 2-2 (“Claim 2-2”) in the secured amount of $3,460.00 (collectively “Harley’s Claims”).

Debtor’s Amended Plan of Reorganization (“Plan”) was confirmed on August 31, 2016. The Plan provides for the surrender of the Motorcycle, subject to this Motion for Sanctions.

Debtor filed an Objection to Harley’s Claims and requested that Harley be sanctioned for violation of the discharge injunction pursuant to 11 U.S.C. § 524 and the Fair Debt Collection Practices Act (“FDCPA”). Debtor alleges that the debt to Harley was discharged in the 2005 Case, and it has prescribed due to five (5) years without payment. Debtor claims that he surrendered the Motorcycle, left it at his previous residence, and tendered the license plate to the Office of Motor Vehicles (“OMV”). The OMV indicates the Motorcycle’s vehicle identification number (“VIN”) does not have current registration.

Harley maintains that it did not receive the Motorcycle and, therefore, has an in rem claim. As a result, the filing of a secured proof of claim did not violate 11 U.S.C. § 524. Further, Harley argues that the Bankruptcy Code supercedes the FDCPA, so no violation of its requirements is applicable. Harley asserts that even if the FDCPA does remain germane, no violation occurred.

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