Collection Of Discharged Debt

[mjmensale]

What is the name of your state? FLORIDA

Several years ago a friend went through a divorce. Part of the divorce settlement was that he would be responsible for all the credit card debt that they had incurred.

Last year, due to a failed business venture, he filed for chapter 7 protection. In his bankruptcy, he included all his current cc debt as well as the cc debt that he had become liable for due to the divorce decree. The bankruptcy was discharged in late 2003. His ex-wife was not involved with the failed business venture and did not file bankruptcy.

After the discharge was finalized, one of the cc companies, DiscoverCard, went after his ex-wife, claiming that she was still liable for the debt since it was a joint account and she hadn’t filed bankruptcy.

The ex-wife in turn, tells DiscoverCard that she isn’t responsible for the debt because their divorce decree stipulates it’s the ex-husband’s responsibility.

Now DiscoverCard is after the ex-husband to pay the debt even though it was included in the discharged bankruptcy. DiscoverCard has also told him that the DiscoverCard cc agreement has a clause in it that allows them to collect on it even though it has been discharged.

It appears that my friend is in a Catch 22. His debts, including the DiscoverCard, were discharged in the bankruptcy but he is still liable for the DiscoverCard debt because of the divorce decree since the ex-wife didn’t file and DiscoverCard has the “secret clause” in their agreement.

Is the bankruptcy discharge superior to the divorce decree or is he still liable for the DiscoverCard debt?

Moe

 

[bigun]

Federal law trumps state law. Have him ask Discover to send a copy of the secret clause.
He needs to call his lawyer and get them to send a letter to Discover threatening to file sanctions for violating the post bk prohibition of continued collection on discharged debt.
BTW, are you sure this is Discover? It sounds like this is a collection agency.

 

[Ladynred]

Yep, sounds like a CA alright.

Got news for the Ex-wife - she IS liable. The divorce decree means SQUAT to creditors, they don't care who it was 'assigned' to in the divorce. Her name is/was on the account, his liability for it was discharged in bankruptcy, now SHE is going to have to pay it or file BK herself. It was an unsecured debt and I don't think there's ANY clause that can survive bankruptcy. Your friend is off the hook, file sanctions against whoever is attempting to collect for violations of the discharge. The Ex-wife is going to have to pay up !!

 

[mjmensale]

It could very well be a collection agency but in conversations the term "DiscoverCard" was repeatedly used. I'll inquire further.

Thanks!

 

[bigun]

Please do. If it's a ca, he can file for not only sanctions for violating the bk injunction but, he can sue for violations of the Fair Debt Collection Pratices Act.

 

[Ladynred]

Doesn't really matter if it is, except in knowing who to charge with violations of the permanent injunction of his discharge. Your friend is off the hook.. no matter what lies the collectors tell. The Ex-wife is stuck with this one whether she likes it or not. This is exactly why divorce and bankruptcy by one partner often leads to the bankruptcy of the other as well.

 

[mjmensale]

Turns out it was a collection agency and not the CC company itself.

Thanks again!

 

[bfason]

If it's a ca, he can file for not only sanctions for violating the bk injunction but, he can sue for violations of the Fair Debt Collection Pratices Act.

No, neither your friend nor his ex-wife has a cause of action against the creditor for violating the bankrupcty stay or the FDCPA.

The ex-wife in turn, tells DiscoverCard that she isn’t responsible for the debt because their divorce decree stipulates it’s the ex-husband’s responsibility.

That excuse doesn't fly. The wife's obligation to the creditor for the joint account was not cancelled by the divorce decree. (Divorce courts are not banko courts; they do not discharge debtors of their debts.) When the husband obtained a discharge, he got off the hook for it, but a discharge in banko does not cancel the debt. It simply makes it unenforceable against the petitioner.

The creditor is still free to pursue the ex-wife.

 

[bigun]

No, neither your friend nor his ex-wife has a cause of action against the creditor for violating the bankrupcty stay or the FDCPA.


This statement is incorrect. Plenty of caselaw.The ex husband who did file bk has recourse.

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Attempting to Collect Debt Discharged in Bankruptcy May Violate FDCPA

Description Court refused to dismiss a suit brought by a debtor whose debts had been discharged in bankruptcy. A bank bought a discharged debt and attempted to collect the debt. That may be a violation of both the Fair Debt Collection Practices Act and the Bankruptcy Code.

Topic Consumer Protection
Key Words Fair Debt Collection Practices Act; Bankruptcy; Discharged Debt
C A S E S U M M A R Y
Facts Wagner filed Chapter 7 bankruptcy and received a discharge of her debts in 1997. Among the debts discharged was a note secured by a mortgage of real property. After the discharge, the note and mortgage were assigned to Ocwen, which is in the business of buying and collecting defaulted debts. Ocwen attempted to collect the discharged debt from Wagner. She sued, claiming violation of the Fair Debt Collection Practices Act for attempting to collect money from her that she did not owe. Ocwen moved to have the claim dismissed, contending that her only remedy would be under the Bankruptcy Code.
Decision Motion denied. Since Wagner's debts had been discharged, she was not a debtor to Ocwen, who attempted to collect money from her. Ocwen's claim that only the Bankruptcy Code, but not the Fair Debt Collection Practices Act, could apply is incorrect. Both laws can be violated at the same time. Ocwen could be found in contempt of the Bankruptcy Code and in violation of the FDCPA. "Wagner's FDCPA claim, at its foundation, is no different from that of any other debtor who is dunned by a creditor who in fact is not owed any money; the fact that her debt was discharged in bankruptcy does not logically differentiate her case from that of a debtor whose debt was discharged in some other way."
Citation Wagner v. Ocwen Federal Bank, FSB, 2000 WL 1382222 (N.D. Ill., 2000)

 

[bfason]

I went back and re-read the original post. Boy was I wrong! How did I ever miss the following?

Now DiscoverCard is after the ex-husband to pay the debt even though it was included in the discharged bankruptcy. DiscoverCard has also told him that the DiscoverCard cc agreement has a clause in it that allows them to collect on it even though it has been discharged.

(That's what I get for posting after midnight.)

If DisoverCard or its assignee contacted the husband after his discharge in an attempt to collect the debt, then yes, they violated the banko stay and can be hauled before the judge for contempt of court. If the ex-husband and ex-wife are on friendly terms, they can use the violation of the banko stay as leverage to obtain a favorable settlement of the claim against the wife. A conference phone call along the lines of "accept X as full settlement and we can all go home without there being any trouble."