From the US Trustee Program press office:
The U.S. Trustee Program (USTP or Program) announced today that it has entered into a settlement agreement with Capital One Bank (USA) N.A. (Capital One) that, if approved by the United States Bankruptcy Court for the District of Massachusetts, will resolve USTP allegations that Capital One sought to collect debts that had been discharged in prior bankruptcy cases.
Under the settlement, an independent auditor will examine approximately 650,000 Capital One customer accounts to ensure that any monies improperly received by Capital One have been or are immediately returned to debtors or their bankruptcy estates. The auditor will also approve reimbursement to debtors and trustees for actual out-of-pocket costs and expenses, including attorneys’ fees incurred to contest erroneous claims. Capital One filed approximately 5,600 proofs of claim seeking payment of debts that had been discharged in prior bankruptcy cases.
Though the agreement is binding on Capital One and offices of the United States Trustee across the country, it does not bind or prejudice the rights and claims of third parties.
For more information, go here.
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I recently had a former Chapter 13 clients who had successfully completed their plan and been discharged come to me and tell me that a year after their discharge Capital One was trying to collect the balance of the discharged Chapter 13 debt! These were elderly people and the collection tactics were quite abusive. I reopened the case and it all stopped. Before filing the motion I decided I wanted to see if this was a common practice. I have done 4 months of research on this. I found this settlement between UST and Capital One in which Capital one was sanctioned for reviving old discharged debts in new Chapter 13 filings. Another collegue in my district (The Northern District of New York) told me that he has 6 adversary proceedings pending against Capital One for the exact same behavior–post discharge collection actions. In one a former client of his paid thousands of dollars on a discharged debt because he was convinced that the debt was still there. I questioned my old clients that I could find but many had moved and none came forward with a similar story.
I am just thinking that given the size of Capital One if they just think the benefits significantly outweight the costs of getting caught. Even though the UST entered into a settlement on their claim their were no penalties paid, they just had to go through an audit process. The debt my clients had was only $ 220 and I bet most people just pay it rather than bother calling their bankruptcy attorney about it. However if you multiply that by the millions of bankruptcies nationwide the company might believe that the risk is worth it and they will just buy everyone off if they get caught.
I am wondering if you have run across this kind of thing.
Thank you.
Mary Lannon Fangio, Esq.
Whitelaw & Fangio
247-259 W. Fayette St.
Syracuse, NY 13202
I haven’t …yet. Needless to say, I will enjoy litigating claims against any creditor that attempts to collect on a claim that was either discharged in a chapter 7, or pay pro rata in a plan and discharged in a chapter 13. I also imagine that in such cases where there are willful violations of the discharge injunction, bankruptcy judges will be more than happy to award fees and sanctions against that creditor to deter such conduct in the future.
Certainly, if anyone reading this is getting a collection call or notice from any creditor that they believe should have been discharged in their bankruptcy, they should contact their attorney – or any other qualified and experienced bankruptcy attorney – immediately. Don’t that the creditor’s or the collector’s word that the debt was not discharged. Speak to an attorney.
Bill McLeod