Bet you've never heard one like this before!

[kyleesgram]

What is the name of your state? Tennessee
We filed a Chapter 13 in 1998, paid it in full, and it was discharged in 2003. It included a joint debt with my ex-brother-in-law, which was for my nephew's funeral. The creditor did NOT file a claim with the bankruptcy court. As far as I know, the creditor tried to collect from the ex BIL, but I think he was found judgment proof. During the 5 years of the bankruptcy plan, the creditor sent statements to my mother and my sister, both of whom paid on the funeral account, but most of their payments were eaten up by interest. Legally, neither of them had any responsibility for the debt, they were just trying to do the decent thing. Prior to the bankruptcy, my mother made an irrevocable assignment of her life insurance to this same creditor. In 2005, 2 years after our Chapter 13 discharge, my mom decided she wanted to transfer the assignment to another provider (same one who buried my dad), but the creditor would not agree to relinquish the assignment. He stated in am email to me (I'm her Power of Attorney) that he planned to take nearly half of her life insurance benefit to repay himself for my nephew's funeral account, and would bury her with the balance. I know this is illegal, and we have tried to go through the Attorney General's office to file a complaint against him, but all they could offer is mediation, which hasn't panned out. What should our next step be? I thought maybe my husband and I could file a lawsuit for violation of federal bankruptcy law (violating the discharge injunction), and figured this might give us the leverage to get him to release the life insurance assignment. My mom is in very poor health, we could need the life insurance any time. It's not that much, but it's all she has. Anyone have any advice? Thanks!What is the name of your state?

 

[Ladynred]

The problem is, the bankruptcy discharge doesn't protect your mother, so I doubt you'd get very far with that. If they were actively trying to collect from you that would be different.

If, per state statutes, what this creditor is doing IS illegal, then get an attorney and sue his butt. I'm not familiar with assignments of that sort, it probably nullifies any clauses in the policy thay may state the proceeds are not to be used to pay DEBTS. You might want to check on that. She assigned the policy for HER burial expenses -- NOT for the BIL's burial debt !

 

[kyleesgram]

Lawyer from which state?

I think you're probably right (re getting a lawyer), but WHERE? The bk was in Indiana, the creditor is in Illinois, now we (and my mom) have all moved to Tennessee. We saw a Tennessee attorney, and she was unsure about what we should do, since each state has different laws concerning the life insurance assignment. I have been researching on the Internet, trying to figure out exactly what the legal violations are that we could file a complaint on, but the whole affair is so intertwined, I can't sort it out. Handling all of my mom's affairs for her (as POA) makes it particularly difficult to figure it out. When I asked the creditor to let my mom have her life insurance back so she could transfer it, he responded by asking me (in an email, which I printed and kept) what I plan to do to repay the old account, so wouldn't that constitute violation of the discharge injunction? I thought that creditors are forbidden to ever again contact you for payment of a debt that was discharged on the bk. Secondly, wouldn't pressuring my mom for payment as an indirect means to get my husband and me to pay, be the same thing? He knows that she lives with us, is on Social Security (not much), has no legal responsibility for the debt, and if he loses the life insurance assignment, he will have no further means by which to get his money.

Can you tell I am stressed out to the MAX over this mess?!!

 

[SkankCheese]

I thought that creditors are forbidden to ever again contact you for payment of a debt that was discharged on the bk. Secondly, wouldn't pressuring my mom for payment as an indirect means to get my husband and me to pay, be the same thing?

Whose name was on the debt, Was she a cosigner? I know you said she paid towards the debt- even though she wasn't legally responsible. If her name was not on any of the papers as being responsible for payment - even though she made payments- then I can't see how he could hold her life insurance payout hostage.

Was there ANY cosigner of the debt, or was the person who filed BK the ONLY one who was 'on the hook' for payment?

 

[Ladynred]

he responded by asking me (in an email, which I printed and kept) what I plan to do to repay the old account, so wouldn't that constitute violation of the discharge injunction?

Yep it sure is ! He cannot ask to be paid on a discharged debt and he cannot DO anything that would force you to pay it either.

Secondly, wouldn't pressuring my mom for payment as an indirect means to get my husband and me to pay, be the same thing?

If he knows she lives with you, yes it probably is. Your MOTHER is in no way liable for that debt and he cannot make her pay something that she is not liable for. I think you need a lawyer to MAKE this guy heel to.

and if he loses the life insurance assignment, he will have no further means by which to get his money.

Ok, I think this would qualify as an attempt to coerce YOU to pay on a discharged debt. He has no legal grounds to demand payment from anyone who's name is not on the debt and he cannot collect from you. So, I think you should consult with a bankrutpcy attorney.

Where are you in TN ?? I'm in TN, I might be able to direct you to a very good BK attorney

 

[kyleesgram]

To answer SkankCheese's questions, No, my mom is NOT on the contract, not even as a co-signer. The only other person on the contract besides me was my ex brother-in-law, who I believe was already found judgment proof in the small claims court. My mom only paid on the debt because she is a good person, wanting to do the right thing, and of course, was expecting to be buried by the same undertaker, so wanted to keep a good relationship with him. She had to stop paying, though, after her health crisis in 2000, which caused huge financial difficulties for her (as well as spilled over onto my husband and me).

Ladynred, you are a godsend! Those are the kinds of answers I needed! Since posting, I did call an attorney in Indiana, where the Chapter 13 took place, and he is going to look at all of our documents (including the email I mentioned) and see if there's a case here. The one fly in the ointment is that even though we can use his services through my husband's employer's legal services plan (my husband is now retired, but we are still eligible to use the plan) , we can't bring a case based on violations of the law related only to my mom. The creditor has to have violated a law relative to our Chapter 13 for us to use the legal services plan benefit.

Just curious, do you know if a TN attorney can file a contempt action against someone for violation of the discharge injunction, or does it need to go back to the original bk court?

One more thing, the creditor has continued adding on charges since the Chapter 13, so now the amount we owed (the pre-petition balance) has more than doubled. Surely this isn't legal is it?

Anyway, thank you, thank you, thank you, Ladynred, for the helpful responses! I sincerely appreciate it!