A recent bankruptcy court case has proven costly for Green Tree Servicing, LLC. In re Loe, Bankr. ND Texas, 2013.
In 2002, a lady divorced her husband, and agreed in the divorce decree to surrender her interest in a mobile home to her husband. He also agreed to pay the balance due on the mobile home.
In 2003, the lady filed chapter 7 bankruptcy and in her bankruptcy schedules, said that she intended "to Surrender (the mobile home) to Ex-Husband." Her personal liability for the debt was therefore extinguished.
In 2011, she filed chapter 13 for different reasons, but Green Tree filed a proof of claim in her case, a formal request to the bankruptcy court for payment. In a modified plan, she provided in her chapter 13 plan that she surrendered her interest in the mobile home to Green Tree.
Nevertheless, Green Tree started calling her and demanding payment, attempting to collect the debt. The debtor notified her bankruptcy attorney, who brought an adversary proceeding or lawsuit against Green Tree in bankruptcy court for violating the chapter 7 discharge injunction, and for Green Tree's violation of the automatic stay in the chapter 13 case per 11 USC Sec. 362(a), the federal law that protects people in bankruptcy from their creditors.
After a trial, the Bankruptcy Court determined that Green Tree's filing of a proof of claim in the chapter 13 case was not a stay violation, because the debtor had not properly surrendered her interest in the mobile home to Green Tree. Instead she surrendered it to her ex-husband, so Green Tree could reasonably argue she still had an "in-rem" or "property only" interest in it.
However, the court said that the lady did properly surrender the mobile home in the chapter 13 case. Therefore the Court found that Green Tree had violated the chapter 7 discharge injunction, and also the chapter 13 automatic stay, by calling the debtor and trying to collect the unpaid debt.
The court then gave the debtor an award of $1000 in actual damages, and also ordered Green Tree to pay her attorney fees of $20,212.70.
The court additionally found that Green Tree "willfully and intentionally violated orders of this court" and assessed punitive damages against them of $25,000 "which the court considers sufficient to deter similar conduct in the future."
Do you think the court made the correct decision? Should Green Tree have been punished like this? Or if so, was it too much? Was it not enough? Please tell us what you think by posting a comment below.