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A discharge is the elimination of the Debtor’s legal obligation to pay a debt (not clearly defined in the Bankruptcy Code).

The effects of a discharge (Section 524):

  1. Voids any judgment whenever obtained, to the extent that such judgment is related to the personal liability of the debtor;
  2. Operates as an injunction against the commencement or continuation of any action to collect that debt as a personal liability of the debtor; and
  3. Operates as an injunction against the commencement or continuation of any action again property of the Debtor.

Statutory Exceptions to Discharge:

  • Taxes (some) – Section 523(a)(1)
  • Child Support, alimony “domestic support obligations” – Section 523(a)(5)
  • Student Loans – Section 523(a)(8)
  • Reaffirmed Debts – Section 524(c)
  • Fraud – Section 523(a)(2)
  • Debts Not Listed – Section 523(a)(7)


That is a difficult answer.  The legal answer is “the debtor gets a discharge for what they are eligible to get a discharge for”.  If that sounds like legal gobbledygook, welcome to the world of law.

Each debtor (except non-consumer, chapter 7 debtors) will receive a discharge form.  But that form does not specifically identify the debts that are discharged, instead it may contain a general disclaimer similar to this one: “This information is only a general summary of the bankruptcy discharges; some exceptions exist.  Because the law is complicated, you should consult an attorney to determine the exact effect of the discharge in this case.”

  • Secured debts: Liens on property are not extinguished in bankruptcy, without a court order.
    • Generally, while a debtor may get a discharge of personal liability of secured debts (such at house or vehicle), the Debtor cannot keep the secured property (such as a house or vehicle) unless they continue to make the secured payments.  The Debtor has some options: reaffirmation, surrender or redeem.  If the lender is not paid, or there is a court order addressing the secured debt, the lender has a right to repossess or foreclose on the property.
  • Unsecured debts: Generally, a Debtor is discharged most debts, unless there is an exception (such as fraud).
  • Co-Debtors – the discharge of the Debtor does not automatically give the same protection to a co-debtor.  Warning – state law differs.

The point is – talk to your bankruptcy attorney in order to determine what debts will survive your bankruptcy.


The Automatic Stay v. The Discharge

The Fair Credit Reporting Act “FCRA” and the Bankruptcy Code deal with debt differently and this difference can become confusing for everyone, including experienced bankruptcy attorneys.  For instance, the legal status of a debt changes as a bankruptcy moves to conclusion.  At the beginning of a bankruptcy the automatic stay stops most creditors seizing assets from the bankruptcy estate’s assets without an order from the Bankruptcy Court. (11 U.S.C. § 362(a)(1))   But the debt is still the same as before the bankruptcy was filed.  If the case is dismissed the creditor has all the same rights as before the case was filed.  Reporting the debt has raised many issues in bankruptcy.  Many courts have found there is no liability under the FCRA to report a debt as being in default, at least until the case is discharged liability under the FCRA. (See, e.g., Nissou-Rabban v. Capital One Bank (USA), No. 15-CV-1675-JLS, 2016 WL 4508241, at *3-4 (S.D. Cal. June 6, 2016); Abbot v. Experian Info. Solutions, 179 F. Supp. 3d 940, 946 (N.D. Cal. 2016)

An order discharging the debt alters the legal nature of the debt and prohibits collection efforts.

Once the order of discharge is entered it “operates as an injunction against the commencement or continuation of an action … to collect, recover or offset any such debt as a personal liability of the debtor.” (11 U.S.C. § 524(a)(2))   Therefore, a discharge order (unlike the automatic stay) alters the legal nature of the debt. Many courts have interpreted the FCRA to require credit reporting agencies “CRA” and furnishers to adjust credit reports after an order of discharge. Where a CRA fails to use reasonable methods to ensure that credit reports show the discharge of debts or where the furnisher fails to correct a report showing that a discharged debt is in default, CRAs and furnishers are subject to liability under the FCRA. (White v. Trans Union LLC, 462 F. Supp. 2d 1079 (C.D. Cal. 2006)

CitiMortgage’s reports were “patently incorrect.”

Gross v. CitiMortgage Inc., 20-17160 (9th Cir. May 16, 2022) The panel reversed the district court’s summary judgment in favor of CitiMortgage, Inc., in Marshall Gross’s action alleging that CitiMortgage violated the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681, et seq., by failing to reasonably investigate Gross’s dispute concerning a debt that CitiMortgage reported to national credit reporting agencies and by providing inaccurate information to those agencies.CitiMortgage erroneously reported a junior mortgage as “past due,” with accruing interest and late fees and a string of missed payments, even though Gross’s liability on the debt had been “abolished” under the Arizona Anti-Deficiency Statute.The panel held that Gross has more than satisfied his burden to make a prima facie showing of inaccurate reporting: he established as a matter of law that CitiMortgage’s reports were “patently incorrect.”


Plans of reorganization are a key component of Chapter 11 and 13 cases.  In order for a reorganization to be successful a plan must be confirmed and completed.  The challenge for the courts is to determine how the debts should be reported on a credit report before completion of the plan.  The order confirming the plan binds the debtor and creditors to the plan’s provisions, (11 U.S.C. § 1327(a)) and controls any pre-existing contracts, including the amount to be paid and lien priority. Once the plan is confirmed the creditors may not relitigate their treatment under the plan (United Student Aid Funds Inc. v. Espinosa, 559 U.S. 260, 269-70 (2010).  Although confirmation binds the parties to the plan’s terms, it does so only as long as the case is active and is subsequently discharged.

If a case is dismissed the debts return to the same position as before the bankruptcy was filed, offset by any monies the creditors received during the case. (11 U.S.C. § 1307)

Given that the bankruptcy is not completed until discharge this raises the issue of whether a credit report can be determined to be inaccurate or misleading if it discloses the pre-petition debt after the bankruptcy court confirms a plan reducing the amount to be paid on the claim, or if it must report the amount established by the confirmed plan (not yet discharged).  You can see the quandary.

Discharge injunction under 524(a)
a) A discharge in a case under this title—
(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title, whether or not discharge of such debt is waived;
(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; and
(3) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor of the kind specified in section 541(a)(2) of this title that is acquired after the commencement of the case, on account of any allowable community claim, except a community claim that is excepted from discharge under section 523, 1228(a)(1), or 1328(a)(1), or that would be so excepted, determined in accordance with the provisions of sections 523(c) and 523(d) of this title, in a case concerning the debtor’s spouse commenced on the date of the filing of the petition in the case concerning the debtor, whether or not discharge of the debt based on such community claim is waived.

When you have a debt that is secured against property (like a house or vehicle), there are actually two issues. First, there is an obligation for the borrower to pay the debt, or the lender can sue and/or take the collateral (house or vehicle).  A bankruptcy discharge eliminates the personal obligation to pay the debt, but does not eliminate the lien on the collateral (house or vehicle).  A discharge turns a secured loan from recourse to non-recourse but does not wipe out the debt. The lien remains “in rem” as to the property.

If the lender is not paid then they have right to repossess the collateral, but cannot sue the borrower.  The lender did not violate the discharge injunction because the “in rem” loan was not discharged. See §524(a)(2) – the discharge prevents an act to collect a debt as a “personal liability” of the debtor. It doesn’t prevent the collection of the debt against property.

What should the debtor do?  Make sure to list the debt and move to avoid it as impairing their exemptions (if applicable).  This would result in both discharging the debt and avoiding the lien.

Renewing liens – discharge violation or now?

As to renewing the lien – one opinion is that “the renewal of the lien after the debt was discharged is a a violation of the permanent injunction. The renewal should be void.”  There are competing opinions so do your own due diligence.  Such as: The claim was in rem and since it was not challenged the lien passed through bankruptcy unaffected. Renewal of such a lien is just maintaining the status quo of it (i.e. Fulton).

Discharge did not automatically accelerate the due date on the promissory note

Bank of New York Mellon v SFR Investments Pool, filed 2/4/24, 9th Circuit, Court of Appeals Nev. Rev. Stat. § 104.3118(1) establishes a six-year statute of limitations for judicial foreclosure actions. Specifically, “an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within 6 years after the due date or dates stated in the note or, if a due date is accelerated, within 6 years after the accelerated due date.” § 104.3118(1)

“we conclude that the previous homeowner’s bankruptcy discharge did not automatically accelerate the due date on the promissory note for purposes of triggering the limitations period under Nev. Rev. Stat. § 104.3118(1)”

Luu et al. v. New Rez et al., (Az Ct of Appeals, Div One, 4/12/22) Held that a bankruptcy discharge does not serve as a maturation of a promissory note and thus does not commence the limitations period on a lender’s ability to foreclose on a deed of trust securing the debt, nor does a bankruptcy discharge trigger an optional acceleration clause, which is exercisable only at the lender’s discretion. The court also concluded that the nature and extent of a security interest is a matter of state law, and thus Arizona law controls resolution of this issue.

Entry of a discharge order in favor of a debtor extinguishes the automatic stay and creates the discharge injunction. The injunction prohibits an act to collect, recover or offset any discharged debt as a personal liability of the debtor, whether or not discharge of such debt is waived. But, Section 524 does not provide an express enforcement mechanism. Debtors have enforced the discharge injunction by reopening their bankruptcy and filing an adversary proceeding or a motion requesting that the offending party be held in contempt.

The person/entity in contempt of the discharge violation is liable for its willful violations of the discharge injunction. To prove a claim of a discharge violation, a debtor must show that the alleged bad actor: (1) knew the discharge injunction was applicable and (2) intended the actions which violated the injunction.

Courts differ as to how much “knowledge” the person/entity must have in order to give rise to the required level of “knowledge” for a discharge violation. Some jurisdictions require actual knowledge of the discharge injunction was applicable to their claim. A belief, even an unreasonable one, that the injunction did not apply to the claim, could preclude willfulness.

Other courts use “constructive knowledge”. Under those cases, the state of mind is irrelevant, and intent to violate the order is no defense.

Collectively most courts look for a showing of intent to collect a debt.  Typically, a mere “technical” violation that lacks the requisite level of intent and, is not actionable.

What is the standard of contempt under 11 U.S.C. § 524? (Supreme Court decision)

Taggart v. Lorenzen  139 S.Ct. 1795 (2019) (6/4/19 – Justice Breyer’s unanimous opinion)

Held:  A court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.  “This standard is generally an objective one. A party’s subjective belief that she was complying with an order ordinarily will not insulate her from civil contempt if that belief was objectively unreasonable. Subjective intent, however, is not always irrelevant. . . . Under the fair ground of doubt standard, civil contempt may be appropriate when the creditor violates a discharge order based on an objectively unreasonable understanding of the discharge order or the statutes that govern its scope”

The opinion clarifies the standard for contempt under 11 U.S.C. § 524. The opinion also includes dicta about the jurisdiction of state courts to decide whether a debt has been discharged.

“…moving litigation out of state courts, which have concurrent jurisdiction over such questions, and into federal courts. See 28 U. S. C. §1334(b); Advisory Committee’s 2010 Note on subd. (c)(1) of Fed. Rule Civ. Proc. 8, 28 U. S. C. App., p. 776 (noting that “whether a claim was excepted from discharge” is “in most instances” not determined in bankruptcy court).”

See also Walls v. Wells Fargo, 276 F.3d 502 (9th Cir. 2002):

“the present scheme [] leaves enforcement to the bankruptcy judge whose discharge order gave rise to the injunction.”

OCWEN Loan Servicing v. Marino, Nos. 16-1229, 16-1238 (B.A.P. 9th Cir. Dec. 22, 2017).  Continuous confusing contact with the discharged debtors by the mortgage servicer was appropriately sanctioned at $1,000 per violation notwithstanding the servicer’s formulaic and contradictory disclaimers in some of the correspondence.

Debtors, Christopher and Valerie Marino, surrendered their real property in their chapter 7 bankruptcy. After they received their discharge in June, 2013, the court granted the mortgagee relief from the automatic stay and closed the case. From June, 2013, through April, 2015, OCWEN, as servicer for the mortgagee, sent nineteen letters stating the amount owed on the debt as the “amount you must pay,” and providing payment due dates. Some of the letters contained the disclaimer that, “if you have received a discharge in bankruptcy, this notification is for informational purposes only and is not intended to collect a pre-petition or discharged debt.” OCWEN also made approximately one hundred calls to the Marinos seeking payment on the discharged debt.

Chapter 7 debtors Christopher Michael Marino and Valerie Margaret Marino sought sanctions against creditor Ocwen Loan Servicing, LLC (“Ocwen”) for its violation of the discharge injunction. The bankruptcy court held a trial and awarded the Marinos $119,000 – one thousand dollars for each improper contact.
On appeal Ocwen argues that the bankruptcy court erred because its correspondence with the Marinos was in compliance with state or federal law. It also contends that the court improperly considered telephone calls, which were not the subject of the motion and not supported by evidence, and that there was no evidence of injury to the Marinos. We discern no error and AFFIRM

In re Taggart – 09-39216-RLD7, BAP OR-15-1119 & OR-15-1158 (9th Cir BAP April 12, 2016)  Detailed discussion o f post-discharge litigation.  Did Debtor participate in post-discharge state litigation sufficiently so as to open him up to attorney fees and other sanctions for pre-petition lawsuit continued post-discharge?

In re Hebner vs. Wells Fargo for continuing violations of the stay, BK08-82938 (Dist of NV 1/2015):  The debtors received a Chapter 7 discharge of their debts in August 2011. Throughout the course of the bankruptcy case and thereafter, Wells Fargo communicated with the debtors concerning the bank’s interest in the debtors’ real property. In September 2014, the court granted the debtors’ motion for contempt for what was characterized as the bank’s continuing collection efforts despite being aware of the bankruptcy discharge.

To the extent Wells Fargo argues that the disclaimers printed on correspondence  (emphasis added) with the debtors protects them from sanctions, it is clear that a legal disclaimer is not carte blanche to otherwise violate statutory prohibitions. “A creditor cannot avoid the consequences of violating the automatic stay or discharge injunction simply by burying an alternative explanation for a clear demand for payment in fine print.” In re Zine, ___ B.R. ___, 2014 WL 5426628, at *7 (Bankr. D. Mass. Oct. 22, 2014). The court further explained:

Put simply, fine print that provides that a creditor, who is clearly seeking to collect a debt, should not be viewed as seeking to collect a debt in the event that the creditor is prohibited from doing so is deserving of no weight. See In re Curtis, 322 B.R. 470, 485 n.19 [(Bankr. D. Mass. 2005)] (“The Court acknowledges, but discounts, the unhighlighted language in the April 15, 2002 letter, which suggests that, in the event of discharge in a Chapter 7 case, no personal liability is asserted. This reservation is of little moment. The lender was continuing to insist that the Debtor make payments on the discharged second mortgage.”). Id. at n.64.

IT IS ORDERED: The debtors’ motion for summary judgment (Fil. No. 312) is granted, and:
1. Wells Fargo is ordered to pay to the debtors punitive damages in the amount of $10,000.00 within 15 days of the filing of this Order; and
2. Wells Fargo is ordered to pay to the debtors their actual damages, exclusive of legal fees and expenses, in the amount of $2,500.00 within 15 days of the filing of this Order; and
3. Wells Fargo is ordered to pay to debtors’ attorneys the full, actual amount of legal fees and expenses debtors have incurred with respect to this matter. Mr. Quinn shall provide a detailed statement of such fees and expenses to counsel for Wells Fargo within 10 days after the filing of this Order and Wells Fargo shall make payment within 15 days thereafter.

Snowden v. Check into Cash of Washington, Inc. (In the Matter of: Rupanjali Snowden), 769 F.3d 651 (9th Cir. 2014),  The debtor may recover against a creditor who violates the automatic stay by seizing property of the estate and fails to cure that violation before the debtor files an action under sec. 362(k).  Recovery includes debtor’s attorney’s fees for prosecuting the stay violation under sec. 362(k).  The Ninth Circuit Court of Appeals recently ruled that, in these circumstances, attorney’s fees incurred in prosecuting a stay violation are recoverable by a debtor against the creditor committing the violation.

This decision should be heeded by creditors in the Ninth Circuit. CIC, a payday lender, clearly violated the automatic stay when it effected a post-petition electronic funds transfer from the debtor’s bank account to pay its pre-petition debt.  Once the transaction was discovered by the Debtor demand was made to return the funds.  The payday lender refused, from the language of the opinion, may have had actual knowledge of the case at the time it effected the transfer.  Had it done so, its liability for the debtor’s attorney’s fees could have been limited to those incurred prior to its settlement offer.

Discharge Doesn’t Start Statute of Limitations Clock Over (involves after closing discovery of non-exempt property)

Reprint from Oregon Debtor-Creditor Newsletter, Oregon State Bar, Fall 2019 (reprinted for educational purposes only)

BAP CASE NOTES, By Jesús Miguel Palomares, Miller Nash Graham & Dunn LLP

In re Brown, 606 B.R. 40; 2019 WL 4167265 (9th Cir. BAP 2019). Conclusion: Entry of bankruptcy discharge did not restart the statute of limitations period for a creditor’s state law claim; the limitations period was further tolled by the discharge injunction.

This opinion addressed an issue of first impression, as explained by the BAP’s introduction: “We publish because no prior published decision has determined whether the discharge injunction triggers the limitations period suspension provided for in the relevant California tolling statute – California Code of Civil Procedure (‘C.C.P.’) §356 [establishing a four-year limitations period for actions based on written contracts].”

Debtors filed a chapter 7 petition with schedules reflecting no assets, so the notice of bankruptcy instructed creditors not to file proofs of claim. The chapter 7 trustee promptly filed a final report showing no assets for distribution, and Debtors received their discharge. Case closed … until four and a half years later, when Debtors moved to reopen their case after having discovered a potential pre-petition personal injury cause of action. The bankruptcy court notified creditors and set a claims bar date for filing proofs of claim. Creditor MOMA filed a timely proof of claim for an unsecured claim of $832.30 (the “Claim”). Debtors objected to the Claim as barred by the applicable statute of limitations.

At the claim objection hearing, Debtors agreed that MOMA’s Claim was subject to a state law allowing a four-year limitations period (“State Limitations Period”) and conceded that their bankruptcy case intervened before the State Limitations Period expired. Debtors also conceded that the State Limitations Period was subject to a state tolling statute (“State Tolling Statute”), which states that the State Limitations Period is tolled as long as the automatic stay prohibited MOMA from taking any collection action.

Debtors presented the following argument to show that the Claim was time-barred: (1) the automatic stay terminated once Debtors received their discharge and their bankruptcy case was closed; (2) the State Limitations Period for the Claim resumed once Debtors’ bankruptcy case closed and expired before Debtors reopened their case; (3) the § 524 discharge injunction did not further suspend the State Limitations Period, so MOMA could have filed suit against Debtors; and (4) because MOMA did not file the Claim in time, it was time-barred. Debtors argued that MOMA should have nominally sued them solely to preserve its rights before the State Limitations Period expired.

In response, MOMA argued that the State Tolling Statute was triggered when the Debtors obtained a bankruptcy discharge, which triggered the § 524 discharge injunction. MOMA pointed out that the State Tolling Statute suspends the State Limitations Period whenever – and so long as – “the commencement of an action is stayed by injunction or statutory prohibition.”

MOMA also denied that the § 524 discharge injunction allowed MOMA to bring an action nominally naming Debtors as defendants solely to preserve its claim. After the hearing, the bankruptcy court overruled Debtors’ objection and allowed the Claim, explaining that, pursuant to the State Tolling Statute, the § 524 discharge injunction suspended the State Limitations Period. The court further ruled that Debtors’ argument that the discharge injunction did not trigger the State Tolling Statute “was unsupported by any persuasive authority and was at odds with the plain language of the statute.” Id. Debtors appealed.

In affirming the bankruptcy court, the BAP began its opinion by noting that this was an issue of first impression on whether the § 524 discharge injunction triggers the state law’s limitations period suspension (the State Tolling Statute).

Section 502 governs the allowance and disallowance of claims. Under § 502(b)(1), when a claim objection is filed, the claim shall be allowed unless “such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.” In reviewing a claim objection, the court must “determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition. …” § 502(b).

Section 108(c) provides in relevant part that if applicable non-bankruptcy law fixes a limitations period for commencing a civil action on a claim against a debtor, and such period has not expired before petition date, then such limitations period does not expire until “the end of such period, including any suspension of such period occurring on or after the commencement of the case.”

Here, MOMA argued that the State Limitations Period never restarted because MOMA was enjoined from pursuing Debtors after entry of their discharge. Conversely, Debtors’ sole argument on appeal was that their bankruptcy discharge did restart the State Limitations Period. Debtors tried to distinguish the automatic stay from the discharge injunction by arguing that the stay is much broader, and that the discharge injunction is limited to only actions seeking to impose personal liability on a debtor.

The BAP was not amused, calling Debtors’ argument “nonsensical,” and “not only [ ] contrary to law, but also [ ] unjust.” Brown, at *5. The BAP pointed out that if Debtors had properly disclosed the personal injury claim with all their assets during the original case filing, the bankruptcy court would have instructed creditors to file claims, and MOMA presumably would have filed the Claim by the bar date and thus avoided the statute of limitations issue altogether.

US v. Marston, No. 11-2100 (United States First Circuit, 09/20/2012) Defendant’s convictions for bankruptcy fraud is affirmed in part, reversed in part and remanded where: 1) the evidence was sufficient for the jury to conclude that defendant’s failure to reveal the aliases she had used to apply for credit cards, plus listed fraudulent debts (in her alias) against collateral, was done with the kind of dishonest or fraudulent awareness required by the statute; but 2) the government failed to establish the element of falsity with regard to the charge for knowingly and fraudulently failing and refusing to disclose credit card debts. Read more…

Second bankruptcy case – limit on discharge: use the 2-4-6-8 rule.
There is a 2 year waiting period to file a Chapter 13 case in which a discharge has been granted in a prior Chapter 13. You need to count from the filing date of old cases to the filing date of new case. This effectively enables you to refile in almost all circumstances.

There is a 4 year waiting period to file a Chapter 13 case in which a discharge has been granted in a prior Chapter 7. Once again, count filing date to filing date. The 4 year rule allows you to obtain a discharge in the subsequent Chapter 13. You may file a Chapter 13 subsequent to a Chapter 7 discharge in less than 4 years; however, you would not obtain the benefit of a discharge. Strategic considerations may deem it necessary to file under such circumstances (potentially stripping off a wholly unsecured secured mortgage subject to a good faith analysis and approval in your local court, or paying off priority taxes in a 100% Plan are examples).

There is a 6 year waiting period for filing a Chapter 7 case in which a discharge has been granted in a prior Chapter 13 case. In addition, the prior Chapter 13 must have been a 100% payout to allowed unsecured claims or there was a payout of 70% of allowed unsecured claims and “the plan was proposed in good faith and was the debtor’s best efforts” {11 U.S.C. 727 (a) (9)}.

Finally, there is an 8 year waiting period for filing a Chapter 7 case in which a discharge has been granted in a prior Chapter 7 case; most people are familiar with this rule. Sometimes attorneys confuse these rules; a reread of the discharge provisions coming out of 727 and 1328 is always instructive.

Branigan v. Bateman, No. 07-1030, 07-1307 (4th Cir Ct App, 2/4/08)
Orders denying motions to dismiss Chapter 13 petitions and confirming debtors’ plans are affirmed over claims that, since the debtors are ineligible for discharges under 11 U.S.C. section 1328(f), they should not be allowed to file a Chapter 13 petition. Not bad faith to file case where no discharge can be entered. Time frame for filing runs from date of Petition to date of Petition, not date of discharge.

There is no rule or local rule allowing for the ex parte reopening. However, customary practice, as recognized by case law, allows for the ex parte reopening without a hearing. See Menk v. LaPaglia (In re Menk), 241 B.R. 896, 916–17 (9th Cir. BAP 1999); Watson v. Shandell (In re Watson), 192 B.R. 739, 744 (9th Cir. BAP 1996), aff’d mem., 116 F.3d 488, 1997 WL 330895 (9th Cir. 1997); Abbott v. Daff (In re Abbott), 183 B.R. 198, 200 (9th Cir. BAP 1995).

Ellsworth v. Lifescape Med. Assocs., P.C. (In re Ellsworth) (Bankr.9th Cir. 2011) 455 B.R. 904, 922.) Regarding dismissal with prejudice:  “[A] bankruptcy court rarely uses its authority to bar the discharge of debts in a later case. In any court, a dismissal order that bars subsequent litigation is a severe sanction warranted only by egregious misconduct. Given that the Bankruptcy Code’s central purpose is remedial, i.e., to afford insolvent debtors an opportunity to enjoy a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt, such an order is particularly devastating in a bankruptcy case. For this reason, a permanent bar to discharge is at times referred to as the capital punishment of bankruptcy, for it removes much of the benefit of the bankruptcy system.Tomlin, 105 F.3d at 937.

In re Jakubaitis, BK 8:13-bk-10223, Adv 8:15-ap–01020, BAP CC-20-1009, (4/7/21) The 9th Circuit BAP affirmed the bankruptcy court’s orders striking the debtor’s answer as a sanction for failure to comply with the court’s order to show cause and entry of a default judgment revoking the debtor’s discharge under section 727(d).

Weil v. Elliott (In re Elliott) (9th Cir. June 14, 2017).  The one-year deadline for seeking revocation of a discharge order is not jurisdictional and may therefore be waived.

Edward Elliott filed his chapter 7 bankruptcy petition and failed to list his home. He received a discharge under section 727(a). Fifteen months later, when the trustee discovered the fraudulent nondisclosure, she filed an adversary complaint seeking an order vacating the discharge under section 727(d)(1). Section 727(e)(1) permits a trustee to seek revocation of discharge within one year of the discharge order. Mr. Elliott did not raise the issue of untimeliness in his response to the adversary complaint. The bankruptcy court revoked his discharge.

FRBP 4004(a)(1)(B) and 4004(a)(1)(E) make clear that the discharge shouldn’t have been entered with a pending 727 action and/or a pending motion to extend the time to file a 727 action.

The outcome of a 523 action, if the creditor wins, excludes the debt(s) at issue from the discharge no matter when the discharge is entered, so that is an area where it varies by district whether the court will hold off until after the 523 actions are resolved or not.

Some debts are automatically not discharged in bankruptcy (child support/alimony, certain taxes, restitution which is part of a DUI conviction, etc)  Other debts may be discharged unless a creditor obtains a court order determining those debts to be non-dischargeable (such as fraud).  523(a)(9) prevents the discharge of damages for death or personal injury caused by the debtor unlawfully operating a motor vehicle, vessel or aircraft while intoxicated. There is no requirement to file an objection to discharge under 523(a)(9). See 523( c)(1) which requires an objection for 523(a)(2), (4) and (6).

If a claim is a claim under 523(a)(6) for willful and malicious injury by the debtor to another entity or the property of another entity – is only for property damage and there is no criminal restitution order then see In re Su, 290 F.3d 1140 (9th Cir., 2002) (whether running a red light creates a nondischargeable debt). The answer appears to be that the debtor may discharge the civil damages under 523 unless the debtor was both willful and malicious.

A.”Willful” means the debtor had either (1) a subjective intent to harm, or (2) a subjective belief that harm is substantially certain,

B. “Malicious” means (1) a wrongful act, (2) done intentionally, (3) which necessarily causes injury, and (4) is done without just cause or excuse.

554 (a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (c) Unless the court orders otherwise, any property scheduled under section 521(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title. (d) Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate.

See also Abandonment

Can someone name debtor in lawsuit even after discharge?

Yes, if the court enters an order or if there is insurance.  The insurance company remains on the hook despite the debtor’s discharge. The plaintiff does a stay lift to file the suit against the debtor with a provision that it is only for purposes of collecting on the insurance. The plaintiff cannot sue the insurance company directly. See the procedure described in Stallings v. Spring Meadows Apartment Complex Ltd. Partnership, 185 Ariz. 156, 913 P.2d 496 (Ariz., 1996).  In Stallings the Arizona Supreme Court reversed the Arizona Court Of Appeals. Stallings v. Spring Meadows Apartment Complex Ltd. Partnership, 886 P.2d 1373, 180 Ariz. 617 (Ariz. App. Div. 1, 1994) . The dissent in the Arizona Court of Appeals (which turned out to be correct) stated: most courts hold that a discharge in bankruptcy does not preclude an action against a discharged debtor as the nominal defendant where he is insured against liability for negligence. See, e.g., In re Edgeworth, 993 F.2d 51 (5th Cir.1993); First Fidelity Bank v. McAteer, 985 F.2d 114 (3rd Cir.1993); Green v. Welsh, 956 F.2d 30, 35 (2nd Cir.1992); In re Fernstrom Storage and Van Co., 938 F.2d 731, 733-34 (7th Cir.1991); In re Jet Florida Sys., Inc., 883 F.2d 970, 976 (11th Cir.1989); In re Beeney, 142 B.R. 360, 362-63 (Bankr. 9th Cir.1992); In re Greenway, 126 B.R. 253, 255 (Bankr.E.D.Tex.1991); In re Peterson, 118 B.R. 801, 804 (Bankr.D.N.M.1990); In re Traylor, 94 B.R. 292, 293 (Bankr.E.D.N.Y.1989); In re Lembke, 93 B.R. 701, 702-03 (Bankr.D.N.D.1988); In re White, 73 B.R. 983 (Bankr.D.D.C.1987); In re Mann, 58 B.R. 953, 958 (Bankr.W.D.Va.1986).

A discharge in bankruptcy does not extinguish the debt itself; it merely releases the debtor from personal liability for the debt.

Edgeworth, 993 F.2d at 53. Section 524(e) 10 of the Bankruptcy Code specifies that the debt still exists and can be collected from any other entity that may be liable. Edgeworth, 993 F.2d at 53. Thus, courts have held that the scope of a section 524 injunction does not prevent a proceeding against the discharged debtor to establish a claim against the debtor’s liability insurer. Id. at 54.

§ 524(a)(2) Green Point Credit, LLC v. McLean (In re McLean), 2015 U.S. App. LEXIS 12736 (11th Cir. July 23, 2015) (Pryor, C.J.).
Creditor violated the discharge injunction by filing a proof of claim for debt that was discharged in debtor’s prior bankruptcy case.

Perez v. Campbell, 402 U.S. 637 (1971) holds that the bankruptcy discharge releases any suspension of a driver’s license for a judgment for uninsured vehicle.

Note – this does not discharge the debt:  Civil infractions, speeding tickets – §§ 523(a)(2)(A) and 523(a)(7). Chapter 13 offers a debtor a broader discharge of debts than Chapter 7. Penalties payable to and for the benefit of a governmental unit are dischargeable under Chapter 13 (11 U.S.C. … Congress omitted section 523(a)(7) debts – governmental penalties – from the list in section 1328(a)(2).

BUT SEE: If the traffic infraction is serious enough for the fine to be considered a criminal fine, then it’s not dischargeable in 13 either…. See, 11 USC 1328(a)(3):
…the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt—(3) for restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime; or …

In the Matter of McGee (12/23/03 – No. 032297) (U.S. 7th Circuit Court of Appeals) Having demanded and received a security deposit under statutory terms designed to ensure that the money would be available for return to the tenants if they kept their own promises, the landlord was obliged to act as the tenants’ fiduciary in investing and preserving the funds. Her making off with the money was an act of defalcation disqualifying her from a discharge per Bankruptcy Code section 523(a)(4).

In re: Mrdutt, Case Number: 17-1255 (9th Cir. May 6, 2019)

The (bankruptcy) court allowed the plan modification under § 1329(c) to surrender the residence, even though the 60-month time period set forth in § 1329(c) had already expired.

We (the BAP) agree with the bankruptcy court that the debtors’ plan payments were not complete for purposes of § 1329(a). We conclude, however, that the debtors could not modify their plan to surrender their residence, because the surrender was a payment made outside the 60-month time limit. Accordingly, we REVERSE.

Accordingly, we join the overwhelming majority of courts holding that a chapter 13 debtor’s direct payments to creditors, if provided for in the plan, are “payments under the plan” for purposes of a discharge under § 1328(a) and hold that this same rule should apply in the context of post-confirmation plan modifications under § 1329(a). Although the language in § 1328(a) is slightly different from that in § 1329(a) — § 1328(a) uses the phrase “payments under the plan” while § 1329(a) uses the phrase “payments under such plan” — we see no reason to interpret these phrases differently.

Notes: First, Judge Brand did not understand how the debtor could obtain a discharge after missing mortgage payments when defaulting on the mortgage was grounds for dismissal.

Second, Judge Brand said that the computation of disposable income assumes the debtor will make mortgage payments. By skipping the mortgage, she said that the debtor would benefit from “living without mortgage payments at the expense of creditors.” Had the debtors surrendered the home, the distribution to unsecured creditors would have increased.

The debtors argued that surrendering the home was not a payment and thus did not run afoul of the Code. Judge Brand disagreed. She held that “surrender is a form of payment for purposes of Section 1329(c).”

Finally, Judge Brand hinted that the proposed modification was not in good faith, thus rendering the amendment unconfirmable under Section 1325(a)(3). She said the debtors’ good faith was “in question” because they paid nothing to unsecured creditors while retaining over $100,000.

The BAP therefore reversed the bankruptcy court for abuse of discretion because the court had no authority to allow an amendment after the 60th month.

N.B.: Since Arizona is in the Ninth Circuit, Rivera likely would have been reversed on appeal. However, there was no appeal, so the Rivera debtors received their discharges. The Gibson debtors likewise received their discharges because there was no appeal. In re Gibson, 582 B.R. 15 (Bankr. C.D. Ill. 2018), and Robert Rivera And Margarita Rivera 13-20842, 2019 WL 1430273 (Bankr. D. Ariz. Mar. 28, 2019).

But see: In re Drabo No. 1:15-bk-653 (Bankr. D. D.C. May 10, 2019) (unpublished) Adopting the minority view, the Bankruptcy Court for the D.C. Circuit found that the chapter 13 debtor’s direct payments to a residential lienholder were not provided for under the plan and, therefore, her failure to make all the payments did not preclude entry of discharge.

In re Simmons, 14-10757 (Bankr. S.D. Ga. Sept. 30, 2019) Bankruptcy Judge Susan D. Barrett of Augusta, Georgia, joined the minority by holding that a post-petition default on direct mortgage payments “standing alone does not constitute a material default” justifying dismissal under Section 1307(c)(6).

Before granting a discharge, Judge Barrett is still requiring her debtors to survive a good faith hearing and explain how they spent the money not paid to the lenders. Implicit in her September 30 opinion is the suggestion that the debtors cannot prove good faith if the money not paid to lenders would have increased the distribution to unsecured creditors.

7/2017 – at least one Phoenix chapter 13 trustees is  considering filing motions to deny discharge based on the arguments in the cases below that post-petition mortgage payments are plan payments.  As of this date there is no 9th Circuit precedent to go on, but Texas, Florida, VA, NY and CO all have decided post-petition mortgage payments are plan payments.

Side bar: the debtors sign a Certification that they Are Eligible to receive a discharge.  If they  failed to  comply with  the terms of the   Plan doesn’t that = perjury?

  • Robert Rivera And Margarita Rivera (2:13-bk-20842-MCW) (3/28/19): ORDER Denying Trustee’s Motion to Dismiss Bankruptcy Case Due to Plan Default. The Court concludes that Debtors’ failure to pay all their direct post-petition mortgage payments is not a failure to complete all payments required under the plan.Having completed all required plan payments and performed all other obligations under the Code and Rules and there are no indicia of wrongdoing, Debtors are now entitled to their Chapter 13 discharge.
  • 1713729_1_Evans_v_Stackhouse.pdf
  • In_re_Heinzle_511_B.R._69_Bankr._W.D._Tex._2014_.pdf
  • In re Gibson, C.D. Illinois (3/2018)   This Court disagrees with the absolutist view that section 1328(a) should be construed in a way that would make every uncured default on a direct payment grounds for dismissing the case without a discharge.  At most, whether a Chapter 13 debtor’s failure to make direct payments warrants denial or revocation of a discharge should be determined on a case-by-case basis, under other sections of the Bankruptcy Code, taking into account the debtor’s state of mind and the effect on creditors.  Where, as here, a debtor’s conduct was truly innocent and unsecured creditors were not harmed, denial of discharge is not an appropriate remedy.  The punishment does not fit the crime.  See in re Starkey, 2016 WL 3034738 (Bankr. D.C.) (where a mortgage claim provide for under Section 1322(b)(5) and thus excepted from discharge, the discharge of the other debts is of no concern to the mortgage creditor and the lack of payments to the mortgage creditor is of no concern to the other creditors, so that ‘denying a discharge in that circumstances would seem silly.’)
  • In re Dukes,  D.C. Docket Nos. 2:15-cv-00420-SPC; 9:09-bkc-02778-FMD (11th Cir. Ct Ap 12/6/18)  Florida case that holds that if the Plan merely states that the debtor would make the ongoing mortgage payments to the bank holding the mortgage, the mortgage is not “provided for” under the plan.  The facts giving rise to the case are different than what this thread is about (here the debtor defaulted on the mortgage, the bank foreclosed, and then tried to collect the balance, and the debtor tried to argue the mortgage was discharged).HELD: In doing so, we hold that, for a debt to be “provided for” by a plan under § 1328(a), the plan must make a provision for or stipulate to the debt in the plan. Because Debtor’s plan did nothing more than state that the Credit Union’s mortgage would be paid outside the plan, it was not “provided for” and was not discharged. 
  • Simon v. Finley (In re Finley), 18-4011, 2018 BL310219 (Bankr. S.D. Ill. Aug. 28, 2018), On the question of a general chapter 13 discharge, the lower courts are split on whether failure to make direct mortgage payments bars a chapter 13 debtor’s general discharge. In re Finley the bankruptcy courts in Illinois disagree on giving a discharge to a chapter 13 debtor who missed direct mortgage payments.
  • Davis v. Holman (In re Holman), 17-1118 (D. Kan. Oct. 31, 2018) The court ruled that the debtors were entitled to chapter 13 discharges because they had completed their plan payments on time, even though the debtors’ misconduct would have resulted in a loss of discharge if the bankruptcy court had a reservoir of equitable power to overcome the command of the statute.
  • Hardship discharge to get around this issueIn re Wayne and Maier, 1:13-bk-07879-BKM Chapter 13 Trustee moved to dismiss the case because the Debtors failed to make direct payments to their mortgage lender outside the plan. Which party prevails depends on whether direct payments to mortgage lenders are “payments under the plan” as required for discharge under ‘ 1328(a). Because the Court is compelled to agree with the Trustee. All is not lost for the Debtors here, however. Under the circumstances of this case, the Debtors are eligible for a hardship discharge under ‘ 1328(b). Seeing no objection to their request and finding that they satisfy the elements required, the Court will deny the Trustee’s motion and grant the Debtors a hardship discharge.

Article: With Notice Comes Responsibility Direct Payments to Creditors Are Payments “Under the Plan” and Required for Debtor to Be Granted § 1328(a) Discharge, By Elizabeth L. Gunn

Chapter 13 provides debtors with many powerful remedies, and one of the most often utilized remedies is the right to cure and maintain payments on a secured (or unsecured) claim on which the last payment is due after the final date of the debtor’s plan pursuant to § 1322(b)(5). In practice, the curing of a debtor’s pre-petition mortgage arrears, without the incurrence of ongoing late fees, attorneys’ fees or default interest, while protected from other collection efforts by the automatic stay, is one of the great benefits to a debtor utilizing chapter 13.

Absent the completion of all payments (INCLUDING THE PAYMENTS TO BE MADE OUTSIDE THE PLAN – SAY TO THE MORTGAGE COMPANY), the debtor has not completed the terms of the “new contract” that he/she proposed to all of his/her creditors and that was confirmed by the bankruptcy court. A debtor who does not complete all payments has not completed all payments under the plan and is not entitled to a discharge, as set forth in § 1328(a).

In re Gibson, 12-81186 (Bankr. C.D. Ill. March 5, 2018)  Failing to make direct payments on a nondischargeable mortgage is not grounds for denying a chapter 13 discharge, according to Bankruptcy Judge Thomas L. Perkins of Peoria, Ill.   The debtors confirmed a five-year plan provided for the debtors to make direct payments on the first and second mortgages on their home. Although the first mortgage was current at filing, there was more than $9,000 in arrears on the second mortgage to be cured under the plan with payments from the trustee.

Near the end of the plan payments, the trustee filed and served two notices under Bankruptcy Rule 3002.1(f) pertaining to the mortgages. The notices stated that the debtors had made all payments required to be made to the trustee, that the pre-petition arrears on the second mortgage had been paid, and that the debtors were to make direct payments on both mortgages.

The lender on the second mortgage responded under Rule 3002.1(g) by saying that the arrears had been cured but that the debtors were about $19,000 in default on second mortgage payments due after filing.  The trustee then moved to dismiss the chapter 13 case without granting a discharge.

Judge Perkins held a trial and concluded that the debtors misunderstood the plan. According to the judge, the debtors believed they were not required to make payments on the second mortgage. They testified that they understood their lawyer as telling them that they were only required to pay the first mortgage.

Judge Perkins denied the trustee’s motion to dismiss and granted the discharge, noting, however, that the debt on the second mortgage was not dischargeable. In his 17 years on the bench, the judge said, he had “never dismissed a chapter 13 case without discharge, where the required payments to the trustee were completed, for the reason that the debtor failed to make all of the direct mortgage payments

Bankruptcy Court Form 3180W Chapter 13 Discharge (12/18)

Some debts are not discharged.  Some examples of debts that are not discharged are:

  • debts that are domestic support obligations;
  • debts for most student loans;
  • debts for certain types of taxes specified in 11 U.S.C. §§ 507(a)(8)(C), 523(a)(1)(B), or 523(a)(1)(C) to the extent not paid in full under the plan;
  • debts that the bankruptcy court has decided or will decide are not discharged in this bankruptcy case;
  • debts for restitution, or a criminal fine, included in a sentence on debtor’s criminal conviction;
  • some debts which the debtors did not properly list;
  • debts provided for under 11 U.S.C. § 1322(b)(5) and on which the last payment or other transfer is due after the date on which the final payment under the plan was due;
  • debts for certain consumer purchases made after the bankruptcy case was filed if obtaining the trustee’s prior approval of incurring the debt was practicable but was not obtained;
  • debts for restitution, or damages, awarded in a civil action against the debtor as a result of malicious or willful injury by the debtor that caused personal injury to an individual or the death of an individual; and
  • debts for death or personal injury caused by operating a vehicle while intoxicated.

In addition, this discharge does not stop creditors from collecting from anyone else who is also liable on the debt, such as an insurance company or a person who cosigned or guaranteed a loan.

This information is only a general summary of a chapter 13 discharge; some exceptions exist. Because the law is complicated, you should consult an attorney to determine the exact effect of the discharge in this case.

By: Peter M. Lively [email protected] And: Hillary C. ColemanThe loss of so many jobs in the current recession will negatively impact many debtors who are making plan payments pursuant to their confirmed Chapter 13 plans but have yet reached plan completion.

Post-confirmation Chapter 13 debtors who experi­ence a decrease in disposable income may become eligible for either conversion to Chapter 7 or a Chapter 13 hard­ship discharge. In circumstances where debtors have not incurred post-petition debt that may be discharged in a case converted to Chapter 7, it is most advantageous for them to proceed with a request for hardship discharge.

Obtaining a hardship discharge under 11 U.S.C. section 1328(b) helps debtors to become eligible for a subse­quent Chapter 7 or 13 discharge two (2) years earlier than they would be if they converted their case and received a Chapter 7 discharge. See Discharge Analysis article in last issue of CDCBAA’s Newsletter.

A motion brought under 11 U.S.C. section 1328(b) is made on grounds that (1) the debtors are not able to complete the payments under their Plan due to circum­stances for which they should not be held accountable, (2) creditors have received more than would have been paid under a hypothetical liquidation of debtors’ estate, and (3) modification of the Plan is not practicable. Such a motion should set forth facts supporting lack of accountability on the debtors’ part for the hardship circumstances and a discharge analysis, evidenced, of course, by declarations, then quote and cite the statute, and finally, explain why debtors’ particular facts and circumstances meet each of the elements of the statute.

For example, where one spouse in a joint case (“Husband”) has lost his job, has been unable to secure replacement income and is receiving unemployment bene­fits that do not provide sufficient disposable income to pay the existing or a modified plan payment, an example of a format for such motion is:

Debtors WARREN WAGE EARNER (“HUSBAND”) and SALLY SALARIED (“WIFE”) (collectively “Debtors”) filed their joint petition as husband and wife under Chapter 13. Debtors’ Chapter 13 Plan was confirmed on [date], 2008. Debtors remained current with their plan payments of $1,500.00 through [date], 2008. See Declaration of HUSBAND, attached hereto and incorporated herein by reference (“HUSBAND Dec.”).

Unfortunately, Debtors have suffered some unexpected consequences since the filing of their case. Specifically, HUSBAND, a widget installer, was laid off from his job in late [date], 2008. He received just two weeks’ sever­ance pay, and now receives only $1,250.00 per month in unemployment benefits. While he has been seeking, and continues to seek, gainful employment, the negative impact of the current economic crisis on the job market is evident. As of even date, HUSBAND has been unable, despite his diligent efforts, to secure new employment. HUSBAND Declaration:

HUSBAND was the primary wage earner for the house­hold, earning base pay of $3,000.00 per month. WIFE earns a gross salary of only $2,500.00 per month. Debtors’ household expenses far exceed WIFE’s salary, and there is certainly no excess available with which to make plan payments of $1,500.00. Debtors’ plan was premised on contributions by both spouses. Without the income from HUSBAND’s employment, Debtors cannot possibly meet their obligations under their confirmed Chapter 13 Plan. HUSBAND Dec.

A liquidation analysis of the case shows that Debtors have already paid more to their unsecured creditors under their Chapter 13 Plan than such creditors would receive if the case proceeds as a Chapter 7. See Declaration of ATTORNEY FOR DEBTORS, attached hereto and incor­porated herein by reference. Under these circumstances, a hardship discharge is warranted.


Under certain limited circumstances, the Bankruptcy Code provides for entry of a discharge order despite failure to pay all of the plan payments. Specifically, 11 U.S.C. section 1328(b) provides:

Subject to subsection (d)2, at any time after the confir­mation of the plan and after notice and a hearing, the court may grant a discharge to a Debtor that has not completed payments under the plan only if–

(1) the Debtor’s failure to complete such payments is due to circumstances for which the Debtor should not justly be held accountable;

(2) the value, as of the effective date of the plan, or property actually distributed under the plan on account of each allowed unsecured claim is not less than the amount that would have been paid on such claim if the estate of the Debtor had been liqui­dated under chapter 7 of this title on such date; and

(3) modification of the plan under section 1329 of this title is not practicable.

Debtors’ circumstances here fall squarely within the statute. First, HUSBAND was laid off by his employer. This has eliminated HUSBAND’s ability to contribute to household expenses, including the plan payments. HUSBAND has attempted to secure new employment, but his efforts have been unsuccessful. This is certainly a situ­ation that is beyond HUSBAND’s control, and accordingly, Debtors’ resulting inability to make their plan payments is a circumstance for which Debtors should not justly be held accountable. Thus, one condition for a hardship discharge, as set forth in 11 U.S.C. section 1328(b)(1), is met.

Second, a hypothetical Chapter 7 liquidation would yield nothing for general unsecured creditors. Thus, another condition for a hardship discharge, as required by 11 U.S.C. section 1328(b)(2), is met here.

Finally, a modification of Debtors’ plan is pointless here as their current household income falls so far below their household expenses that there is clearly no means by which to modify the Chapter 13 Plan feasibly. Thus, all conditions for hardship discharge, including impractica­bility of modification of the Plan, required under 11 U.S.C. section 1328(b)(3) are met here.

Under these circumstances, 11 U.S.C. section 1328(b) permits this honorable Court to enter a discharge order.

When, as here, the value paid into the plan is no less than a hypothetical Chapter 7 liquidation payment to general unsecured creditors, and Debtors’ reduced income resulting from unexpected and uncontrollable separation from employment make further plan payments and plan modification infeasible, the Bankruptcy Code permits this honorable Court to enter a discharge order. Debtors respectfully request that the Court grant them a discharge.

Branigan v. Bateman, No. 07-1030, 07-1307 (4th Cir Ct App, 2/4/08)
Orders denying motions to dismiss Chapter 13 petitions and confirming debtors’ plans are affirmed over claims that, since the debtors are ineligible for discharges under 11 U.S.C. section 1328(f), they should not be allowed to file a Chapter 13 petition. Not bad faith to file case where no discharge can be entered. Time frame for filing runs from date of Petition to date of Petition, not date of discharge.

Using Till in chapter 13, shortly after discharge in chapter 7:  Till could be used for the plan, but the problem is that without a discharge a lien remains in place unless the debt is paid pursuant to non-bk law. 1325(a)(5)(B)(i).  Lien strip-offs are OK because there is no allowed secured claim (per 506), but here you are talking about some 506 value, so there is an allowed secured claim. Thus, you could pay Till if you need to in order to make the plan feasible, but the lien has to be retained and will be in default (for non-payment of the interest) once the plan completes.  But see this additional argument:  If this is a Chapter 20, the Debtor’s personal liability on the car loan was discharged in the first Chapter 7.  This would include a discharge on any interest claim over and above the Till rate in the subsequent Chapter 13.  Therefore it seems that one can do a cram down on the rate in the subsequent 13 without problem.   But, a third thought:  the issue is neither the personal discharge or the cramdown rate. The issue is whether the contract interest rate survives as a lien against the vehicle after the completion of the 13.  Must the lender release the title after being paid less than whats owed under the contract ? In addition to the contract interest “surviving”, what about the lenders fees and expenses in getting advice about the surviving contract interest rate ?

Civil infractions, speeding tickets – §§ 523(a)(2)(A) and 523(a)(7). Chapter 13 offers a debtor a broader discharge of debts than Chapter 7. Penalties payable to and for the benefit of a governmental unit are dischargeable under Chapter 13 (11 U.S.C. … Congress omitted section 523(a)(7) debts – governmental penalties – from the list in section 1328(a)(2).

BUT SEE: If the traffic infraction is serious enough for the fine to be considered a criminal fine, then it’s not dischargeable in 13 either…. See, 11 USC 1328(a)(3):
…the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt—(3) for restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime; or …

In re Andrews, Adv. Proc. No. 15-04724 (Bankr E.D. Mich., October 2, 2015). The Michigan Unemployment Insurance Agency alleged that the debtor was overpaid $6,897 in unemployment benefits because she intentionally failed to report wages from two jobs. The Agency imposed a quadruple-damage statutory penalty with interest, and demanded payment of more than $34,000.

The debtor subsequently filed for Chapter 13 bankruptcy. The Agency filed an adversary complaint to determine the dischargeability of the overpayment, penalty and interest. The debtor filed a motion to dismiss the penalty portion of the complaint.

The bankruptcy court granted the debtor’s motion, holding that the quadruple-damage penalty is dischargeable. The bankruptcy court’s analysis focused on two particular sections of the Bankruptcy Code, 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(7).

Chapter 13 offers a debtor a broader discharge of debts than Chapter 7. Penalties payable to and for the benefit of a governmental unit are dischargeable under Chapter 13 (11 U.S.C. § 523(a)(7)), but not Chapter 7.

The bankruptcy court explained that, in 2005, Congress significantly narrowed the so-called Chapter 13 “super discharge” by limiting the debts specified in 11 U.S.C. § 1328(a)(2) by specifically noting the number of subsections of section 523(a) that are non-dischargeable. Congress omitted section 523(a)(7) debts – governmental penalties – from the list in section 1328(a)(2). The bankruptcy court reasoned that, by omitting penalty debts from the winnowing of the super discharge, “Congress intended that they remain dischargeable under Chapter 13.” This is true even if the penalty debt arises from fraud.

The general rule seems to be that except for fraud proven in a 523 non-dischargeable adversary, a claim of the social security administration for over-payment of benefits is discharged (but no 9th Cir cases). Matter of Neavear, 674 F.2d 1201 (7th Cir.1982); Rowan v. Morgan, 747 F.2d 1052 (6th Cir.1984); In re Carey, 3,6 B.R. 194 (Bankr.D.Kan.1983); Matter of Hawley, 23 B.R. 236 (Bankr.E.D.Mich.1982).  Additionally, money may not be withheld from future social security benefits under either setoff or recoupment.  Lee v. Schweiker, 739 F.2d 870 (3rd Cir.1984), and In re Hagan, 4,1 B.R. 122 (Bank.D.R.I.1984).  However, the courts have not always applied the same analysis to other benefits, such as unemployment. See cases at end of this post.

In re Caldwell, 350 BR 182 (2006) indicates that it is a dischargeable debt absent an exclusion under Bankruptcy Code Section 523, but the recoupment action is not stayed thereby allowing the withholding to continue.

In re French, 20 B.R. 155 (BK Court D. Oregon, 5/20/1982) Debtor, retired state employee, filed a complaint to enjoin the United States Social Security Administration from offsetting a prebankruptcy overpayment of social security benefits against postbankruptcy benefits and sought to have government held in contempt. The Bankruptcy Court, Donal D. Sullivan, J., held that: (1) section of Social Security Act exempting social security benefits from operation of any bankruptcy or insolvency law is a statutory spendthrift provision which did not preclude an overpayment of social security benefits from being dischargeable in bankruptcy; (2) Bankruptcy Code does not by implication make an exception from discharge for recoupment of security overpayments from social security benefits; and (3) United States as an entity cannot be held in contempt by one of its own courts.  Judgment for debtor.

In re McWilliams, 384 B.R. 728 (Bankr.N.J., 2008) explains why “setoff” is not usually an available remedy . Setoff requires that both claim exist before the bankruptcy is filed although they can rise out of separate transactions.  Recoupment generally is not available as a remedy because it applies to claims arising from the same transaction/contract.:

Section 553 of the Bankruptcy Code provides that a debt owed by a creditor to a debtor may be “setoff by a claim the creditor holds against the debtor. 11 U.S.C. § 553(a) (2008). Only debts and claims that arose prior to the commencement of the debtor’s case may be setoff against one another. Id. Pre-petition claims against the debtor may not be setoff against post-petition debts owed to the debtor. Id.

The common law doctrine of recoupment provides an exception to setoff in bankruptcy cases. Recoupment is applied when the limitations of setoff in bankruptcy prove inequitable. Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065, 1079 (3d Cir.1992)superseded by statute on other grounds, Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8, 105 Stat. 80, as recognized in In re Mu’min, 374 B.R. 149 (Bankr.E.D.Pa. 2007). In order for the recoupment doctrine to be applied, both debts must arise out of a single integrated transaction such that it would be inequitable for the debtor to enjoy the benefits of that transaction without also meeting its obligations. Id. at 1081. In the context of bankruptcy, recoupment has most often been applied when the creditor’s claim against the debtor and the debtor’s claim against the creditor arise from the same contract. Lee, 739 F.2d at 875. Because recoupment does not involve separate mutual debts, it is an exception to the automatic stay. Id. In order to determine if recoupment is proper, the Court must look to the particular facts and equities of each case. In re Malinowski 156 F.3d 131, 135 (2d Cir. 1998).

It appears that the social security administration does try to exercise recoupment in some cases. In re Rodriquez, Case No. 09-93431-JB (Bankr. N.D. Ga. 3/23/2010) (Bankr. N.D. Ga., 2010). There the bankruptcy court declined jurisdiction of the debtors complaint that the social security administration had failed to give him a pre-recoupment hearing. The debtor had failed to exhaust his administrative remedies. The court seemed to ignore that the right to a pre-recoupment hearing is irrelevant if there is no right to recoupment. The debtor was pro se and did not allege a violation of the stay or of the post discharge injunction.

Appellant, State Accident Insurance Fund Corporation (SAIF), is liable to the debtor for compensation for a permanent partial disability she suffers due to a work-related injury. SAIF seeks to reduce the amount of the award by a sum equal to an excess of temporary disability payments which SAIF overpaid to the debtor on her claim.1 On cross-motions for summary judgment, the bankruptcy court determined that the over-payments could not constitute a setoff under 11 U.S.C. § 553,2 nor could SAIF deduct the over-payments by way of recoupment. It entered a declaratory judgment to that effect. We REVERSE. In re Harmon, 188 B.R. 421 (B.A.P. 9th Cir., 1995)

In this equitable recoupment case, we are asked to determine if there is a “logical relationship” between two long-term disability (“LTD”) claims which were separated by an intervening bankruptcy petition. The debtor asserted that the insurer had violated his discharge injunction by adjusting his post-petition benefits in order to recover its pre-petition over-payments. The bankruptcy court denied recoupment to the insurer, holding that the two claims were different transactions. We AFFIRM. In re Madigan, 270 B.R. 749 (B.A.P. 9th Cir., 2001)

In re: Harleston (06/05/03 – No. 02-55770) (9th Cir) The California Board of Equalization waived its sovereign immunity by filing a proof of claim in a previous bankruptcy proceeding, thus the debt to the Board was discharged.

Walls v. Wells Fargo Bank, N.A. (01/08/02 – No. 00-17036)(9th Cir. Ct App) There is no implied private right of action for violations of 11 USC 524, which enjoins debt collection against a debtor after a discharge in bankruptcy, nor may a debtor file a simultaneous claim under the Fair Debt Collections Practices Act.

Stratosphere Litig.. LLC v. Grand Casinos, Inc. (08/13/02 – No. 01-15947) (9th Cir Ct App) In a contract dispute, one party’s obligation to fund an escrow account (a concurrent condition) was discharged when the other party, charged with raising additional equity, filed for bankruptcy, and a third-party beneficiary’s claims are subject to that defense.

The State Bar of California v. Taggart (05/10/01 – No. 99-56343) Costs of attorney disciplinary proceedings brought by California State Bar are compensation for the bar’s pecuniary loss and are thus dischargeable in bankruptcy under 11 USC 523(a)(7)

In re: Marilyn S. Scheer, No. 14–56622 (US Court of appeals, 9th Cir., April 14, 2016)  Pro se appellant Marilyn Scheer, an attorney with a suspended California law license, contends that the district court erred when it held that her debt to a former client was nondischargeable under 11 U.S.C. § 523(a)(7). We agree with Scheer that this particular type of debt does not fall within the scope of section 523(a)(7), so we reverse the district court and remand for further proceedings.

Scheer’s performance as an attorney leaves much to be desired, and it is unsettling that she can use bankruptcy to avoid refunding her client’s improperly collected fees. But our moral take on Scheer’s conduct does not control—the statutory language and policies underlying section 523(a)(7) do. And under the current state of the law, the debt to her client does not fall within the section 523(a)(7) nondischargeability exception.

In re Placeres, 578 B.R. 505 (Bankr. S.D.N.Y. 2017) considered Huh in the 523(a)(6) context and raised a question about whether a 523(a)(2)(A) rule, where the fraud doesn’t have to be committed by the debtor, can even be applied under 523(a)(6), where the debt must arise from “willful and malicious injury by the debtor,” and held that the “should have known” standard is contrary to 523(a)(6).  See also In re Osborne, 604 B.R. 582 (Bankr. M.D. Ga. 2019). As an alternative the Placeres court also held that the creditor had not proven intent even under the Huh “should have known” standard.

Sachan v. Huh (In re Huh), 506 B.R. 257 (9th Cir. BAP March, 2014) Judge Barry Russell, Central District of California, En Banc

Issue:   May the fraud of the debtor’s partner or agent be imputed to the debtor thus making the vicarious debt non-dischargeable?

Holding:   Yes, but only where the debtor “knew or should have known” of the fraud, i.e., had a “culpable state of mind.”

The creditor here proved in state court that he was cheated by a broker (not the debtor here) when he bought a business from a third party.  The state court judgment was against the broker, the corporation the broker worked for and Huh – the debtor here and owner of the corporation.  The reason the state court judgment was against Huh is not terribly clear but it is based on the fact that he owned the corporation and that it was doing business solely under his broker’s license.  The broker who committed the fraud received some 95% of the commission paid on the deal and the corp received the rest.  When Huh filed chapter 7, the judgment creditor filed a non-dischargeability complaint based on fraud.  After trial, the bankruptcy court made a number of findings that the debtor was not even aware of the sale until it closed and certainly did not make any misleading statements, directly or indirectly, to the creditor.  “The court found that [the broker] was [the debtor’s] agent, [but] declined to impute [the broker’s] fraud to [the debtor].”

The BAP affirmed.  The BAP began by discussing two old Supreme Court cases.  In Neal v. Clark, (1877) “the Supreme Court interpreted the term ‘fraud’ to mean positive or active fraud, and not ‘implied fraud, or fraud in law, which may exist without the imputation of bad faith or immorality.’”  But in Strang v. Bradner, (1885), the Supreme Court said, “[W]e are of [the] opinion that [a partner’s] fraud is to be imputed . . . to all the members of his firm.”  “This is especially so when, as in the case before us, the partners, who were not themselves guilty of wrong, received and appropriated the fruits of the fraudulent conduct of their associate in business.”  The BAP noted that the discharge was not as “liberal” in those days and was heavily based on partnership law.  Also, “Agency law, as we understand it today, was not well developed.”

The BAP specifically adopted the “knew or should have known” test, i.e., the partnership or agency debt owed by the partner is considered incurred by fraud, the fraud of the partner, only where the partner “knew or should have known” of the fraud.  It discussed the Geiger and Bullock cases where the Supreme Court held that Congress intended these debts to be non-dischargeable only where the debtor had a “culpable state of mind.”

Peklar v. Ikerd (08/09/01 – No. 00-55464) (9th Cir. Ct App) A California state civil court judgment for conversion may be discharged in bankruptcy because it does not involve “willful and malicious injury” under 11 USC 523(a)(6).

Baldwin v. Kilpatrick (05/09/01 – No. 00-15332) Under 11 USC 523(a)(6), a prior state court proceeding that granted default judgment in a battery lawsuit that was previously arbitrated will have preclusive effect on whether judgment is nondischargeable as a “willful and malicious injury”. Default judgment entered in lower court acts as collateral estoppel and granted Movant’s summary judgment in Movant’s nondischargeability action (plaintiff in superior court case).

NOTE: Most Complaints objecting to dischargeability of a debt includes 523(a)(6) include a “catchall” count. Regarding intent and how to prove it, the best advice is to use Kawaauhau v. Geiger, 523 U.S. 57, 140 L.Ed.2d 90, 118 S.Ct. 974 (1998) as your guide. The Supreme Court held that the actor needed to be aware that the conduct was not only wrongful, but also would necessarily cause the injury in question to rise to the “willful and malicious” standard. Since Geiger, most courts have used a subjective approach to determine the intention required for “willfulness.” In re Moore, 357 F.3d 1125 (10th Cir. 2004); In re Su, 290 F.3d 1140 (9th Cir. 2002); In re Markowitz, 190 F.3d 455 (6th Cir. 1999).

Can a debtor discharge a debt arising out of a deliberate or intentional act that causes injury to you?

A recent article addressed the general issue of discharging debts in bankruptcy and various grounds for excepting debts from discharge in Chapter 7. This article focuses on the discharge exception for debts arising out of willful and malicious injuries by the debtor. The United States Court of Appeals for the Fourth Circuit recently reiterated in TKC Aerospace Inc. v. Muhs that such debts may be dischargeable it the debtor did not intend to cause injury.


Super discharge of Section 1328 and 523(a)(6) claims.

In 2005, to restrict Chapter 13’s “super discharge,” Congress expanded section 1328(a)(2)’s list of non-dischargeable debts to include, inter alia, those described in sections 523(a)(2)(a)(3), or (a)(4). Waag v. Permann (In re Waag), 418 B.R. 373, 377 (9th Cir. BAP 2009). Instead of incorporating section 523(a)(6) into Chapter 13, Congress added section 1328(a)(4), which excepts from discharge debts for “willful or malicious injury by the debtor that caused personal injury to an individual or the death of an individual.” Section 523(a)(6), which excepts from discharge debts for “willful and malicious injury by the debtor to another entity or to the property of another entity,” is similar to section 1328(a)(4), but not identical. Section 1328(a)(4) applies: (1) to personal injuries or death, not to injuries to property; and (2) to “willful or malicious” injuries, rather than “willful and malicious” injuries.


Normally that type of contract provision is void.  Even a stipulated judgment stating that the debt is not discharged in bankruptcy is not entitled to res judicata as the issue of “discharge” because it was not litigated in the Superior Court (most likely the bankruptcy had not yet occurred).  If the stipulation had findings of fact listing the elements of common law fraud (state law elements are not identical to applicable federal law); those findings are entitled to collateral estoppel in a timely filed adversary in the Bankruptcy Court.  For instance: some of the elements of fraud are a knowing, material misrepresentation of fact reasonably relied upon and where there were damages.However, a default judgment with no appearance by the Debtor, does not preclude any issues.

Deadline to file a non-dischargeability action: An Adversary action would need to be filed in the Bankruptcy Court within sixty days of the meeting of creditors to determine if the debt is not discharge

Hugger v. Warfield (In re Hugger) BAP No. AZ-18-1003-LBTa (9th Circuit, Apr 05,2019) Facts:Debtor had three nonpriority unsecured debts. They were owed to the Internal Revenue Service, Arizona Department of Revenue, and Enhance Recovery Co. Debtor filed a chapter 7 and received a discharge. A few months after the discharge, debtor filed a motion to vacate the discharge and dismiss the case. Debtor filed the motion because he had mistakenly filed his chapter 7 case too early for certain tax debts to be discharged. Bankruptcy court denied the motion because Debtor failed to show grounds for vacating his chapter 7 discharge so that he could file again to discharge certain tax debts.

Link to the National consumer Law Center “NCLC”‘s Clearing a Pat to a New Beginning, a Guide to Discharging Criminal Justice Debt in Bankruptcy, published 10/2020.  Very helpful information.

Question: Is renewal of a pre-petition judgment after being included in ch7 considered a violation of discharge injunction? No real property involved.

Probably yes.  The renewal as to real property is generally deemed a ministerial act and not a violation.  (Judge Collins discussed this in Casillashttps://www.azb.uscourts.gov/sites/default/files/opinions/azb_live.2.17.bk_.12897.41453356.0.pdf

However, renewal of a pre-petition judgment when there is no real property seems to violate the discharge injunction.  Debtor’s counsel should send a letter requesting that the creditor remedy the discharge violation by withdrawing the judgment lien.  If they refuse to do so, then there is evidence of a “willful” violation of the discharge injunction, and a good argument that the creditor should be sanctioned, which may include them paying attorney fees and costs.

Check out In re Kellogg,  601 B.R. 537  (Bank. D. Colo. 2019).  It does a good job of explaining how a prepetition lien can “ride through” the bankruptcy and not be impacted by the discharge.  However, when the creditor renews the judgment, they need to be sure to include qualifying wording that states that they are only renewing as to “in rem” rights and not trying to collect anything personally.
Did the creditor filed a proof of claim as a general unsecured creditor?  If so, there may be an argument that they have waived any right to enforce their lien post-discharge.  Last, if they try to argue that the renewal is as to personal property that was nonexempt as of the petition date, there is an argument that they never had a “perfected” lien at the time of filing because they would need to perfect their lien through possession.  ARS 33-964 provides that recording a lien perfects the lien as to real property, but not personal property.

Sandford Landress v. Cambridge Land Co. II LLC (In re Cambridge Land Co. II LLC), 20-1110 (B.A.P. 9th Cir. April 2, 2021)

If the case was administered and closed, undisclosed or unscheduled property remains in the estate, perhaps indefinitely. On the other hand, if the case was dismissed, all property reverts to the debtor, including undisclosed property.

The debtor’s standing is also different after dismissal. Because all property revested in the debtor, the debtor can pursue undisclosed property after dismissal. If the case was administered and closed, the debtor would not have standing to collect undisclosed property.

More importantly, when the LLCs’ chapter 11 cases were dismissed on December 30, 2014, all of the estate property revested in them at that time under § 349(b)(3), “regardless of whether the property was scheduled.” Id. at 912 (emphasis added) (citing § 349); see also Cohen v. Tran (In re Tran), 309 B.R. 330, 334 (9th Cir. BAP 2004), aff’d, 177 F. App’x 754 (9th Cir. 2006) (dismissal under § 349(b) is intended to “‘undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case.'”) (citations omitted).

Is a personal guaranty discharged in bankruptcy (7th Cir case)

In re Schlundt adv Reinhart FoodService, LLC, 20-02091 (Bankr. E.D. Wis. 8/19/21, 7th Cir.) In 2003, David Schlundt signed a personal guaranty to assure payment of his business’s debts to Reinhart FoodService L.L.C. Eleven years later, he and his wife filed a no-asset Chapter 7 bankruptcy case. The debtors obtained their discharge in 2014, and in 2018, Schlundt’s business ordered and received some additional goods and services from Reinhart for which it did not pay. The business closed shortly thereafter. Reinhart asked to reopen the debtors’ case, seeking a declaration that its post-petition invoice for those 2018 goods created a fresh liability under the personal guaranty. Reinhart moved for summary judgment in its favor. The debtors objected, arguing that all debts related to the personal guaranty, whether matured or contingent, were discharged in 2014.

Based on controlling Seventh Circuit precedent, the Court denies Reinhart’s motion for summary judgment. Moreover, because any motion for leave to amend the pleadings would be futile, the Court grants summary judgment in favor of the debtor-defendants, pursuant to Federal Rule of Civil Procedure 56(f).

Link to the National consumer Law Center “NCLC”‘s Clearing a Pat to a New Beginning, a Guide to Discharging Criminal Justice Debt in Bankruptcy, published 10/2020.  Very helpful information.

Question: I was charged with contracting without license and I was ordered to pay restitution to the victim. I don’t have the money to pay the large amount and The only income I have is my retirement. Will I will be able to to ask the bankruptcy court to consider eliminating the restitution. My probation is for 1 year and it will end next June.

Answer: First determine the type of restitution.  Did it come from a state court?  Under Section 523(a)(13), debts for “payment of an order of restitution” are limited to those “issued under Title 18, United State Code”. In other words, if the case in which the order of restitution was issued arose from a state law (as opposed to a federal criminal law) violation, the claim ***NOT*** non-dischargeable for the reason that it arises from an order of restitution.

That said, to the extent that the creditor involved suffered damages as a result of your not being licensed, there may still be a claim for exception to discharge based upon allegations of fraud under Section 523(a)(2) if you deliberately misrepresented your licensing to the creditor in order to gain his business.

Is a criminal restitution judgment dischargeable because it is payable to the victim and not the state?

In re Reif, 363 B.R. 107 (Bankr. Ariz. 2007); Kelly v. Robinson, 479 U.S. 36, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986). NO. The reasons for this conclusion are explained in the balance of this decision.

In re Wilson, __ B.R. __ (E.D.Va. 2003) (E.D.Va 2003) Debtor, who disposed of a motor vehicle that was subject to a lien, was charged with a felony under Virginia law. Prior to debtor’s trial on this charge, he entered into a plea agreement under which he pled guilty to the misdemeanor crime of fraud as an accessory after the fact. The Richmond Circuit Court found debtor guilty and additionally entered an order on April 30, 2002, requiring debtor to pay criminal restitution to plaintiff.

Plaintiff, a secured creditor, objected to discharge. The Court looked at split in authority on this issue, and opted for the plain language of the Bankruptcy Code, which makes restitution “payable to or for the benefit of a governmental unit” is nondischargeable.

Note: while criminal restitution is non-dischargeable under section 523, it is not one of the listed priority debts in section 507 (the same problem as with educational loans). Therefore, any attempt to pay that unsecured debt in full in the plan without the same percentage payback to other unsecured creditors would likely cause the trustee to object. Instead, try to get the agency to whom the restitution is owed to agree to a long term payback of the restitution–longer than the Ch 13 plan’s duration. Then, using section 1322(b)(5), pay the restitution outside the plan as a budget expense.

Section 524 does not set forth a remedy for a discharge violation. Therefore, bankruptcy courts rely § 105(a), and on their inherent powers to sanction discharge injunction violations. Different jurisdictions award different damages for discharge injunction violations.

1. Actual Damages
Courts may award actual damages to a debtor harmed by a willful discharge violation. Actual damages may include lost wages and costs for mileage, lodging and other travel expenses. Some courts have awarded actual damages for emotional distress caused by a discharge violation. However, the debtor will bear the burden to prove a direct relationship between the creditor’s actions and the emotional distress.

Courts also routinely award attorney’s fees. Attorney’s fees awards for discharge violations are calculated using the lodestar method that also is used to calculated damages for stay violations.

2. Injunctive Relief

A debtor may also obtain injunctive relief, such as ordering a lien release, or cancellation of a state court judgment.

3. Punitive Damages

In some courts, an award of punitive damages also is available for discharge violations. These courts rely on the broad language of § 105(a), allowing the court to issue “any order” necessary to carry out the provisions of title 11 to justify an award of punitive damages.

In jurisdictions where punitive awards are permissible, the courts will consider the following factors: (i) the defendant’s conduct; (ii) the defendant’s ability to pay; (iii) the motives for the defendant’s actions; and (iv) any provocation by the debtor. Where conduct is particularly egregious, a court may award continuing damages for subsequent violations, or require the bad actor (creditor) to verify that it has taken steps to prevent further bad behavior.

However, most courts hold that punitive damages awards are impermissible as criminal contempt sanctions, which are outside the purview of the bankruptcy courts. A contempt proceeding for violation of the discharge injunction is civil in nature which should be designed to remedy past misconduct and deter future violations. Bankruptcy courts have no criminal contempt power to punish past behavior.