The Fausers lived in the Houston Texas area and filed chapter 7 bankruptcy. They filed their statement of intent to surrender their 6 rental properties. Green Tree Servicing, LLC was the mortgage company of at least two of the loans. Green Tree called the Fausers on the telephone after the bankruptcy trying to collect on the mortgages.

Green Tree also sent Fauser a letter notifying him that he was in default on one of the properties for "failure to submit your monthly payments..." The Fausers sued Green Tree for violating the bankruptcy discharge order, which forbids creditors from trying to collect debts that have been discharged (or cancelled) in bankruptcy.

Both parties filed motions for summary judgment, and the bankruptcy court ruled that Green Tree violated the discharge order provided by Section 524 of the Bankruptcy Code on at least one occasion, by sending the collection letter. Green Tree argued that it should not be liable because its letter contained a disclaimer that "Green Tree is not attempting to collect or recover the debt as your personal liability, but is only complying with statutory notice requirements" but the judge said that a "boilerplate disclaimer does not negate a creditor's attempt to enforce a personal liability post-discharge."

The court also found that there was some evidence that Green Tree "willfully" violated the discharge injunction, because they had received the account notes from the prior servicer that discussed the bankruptcy, and answers to interrogatories disclosed that Green Tree knew about the bankruptcy when they boarded (set-up) the loan. The court reserved the questions of the extent to which Green Tree violated the discharge injunction and the amount of damages to award to Fauser for a later hearing.

Do you think the court made the correct decision? Should Green Tree have been allowed to continue to try to collect from the debtors? Why or why not? Please give us your comments or questions below!

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