In re Jones, Case No. 09-14499-BFK
The Debtor filed a motion for contempt based on the confirmation order based and how Capital One reported the debtors account to the credit rating agency. The Chapter 13 plan contained a provision that “if a creditor reports to the consumer reporting agencies the receipt and timeliness of the payments on any debt dealt with in this plan, then the claim as altered by the confirmed plan, rather than the original loan agreement, should form the basis for the report.” Further, the debtor argued that the reporting of the debt violates the Consumer Data Industry Association’s Credit Reporting Resource Guide.
Since the confirmation of the plan, Capital One has continued to report the original loan balance to the credit reporting agencies. Capital One argued that (a) it did not have adequate notice of the Confirmation Order pursuant to Bankruptcy Rule 2002(c)(3), (b) the credit reporting resource guide does not constitute a national standard, and (c) the confirmation order does not reference or incorporate the CDIA guide. Further, Capital One’s view is that plan only required that it update the balance as payments are received under the Plan.
The Court decided that it was unable to conclude that the resource guide constitutes a national, legally enforceable standard for the reporting of debts in a Chapter 13 case. The Court held that “a violation of a confirmation order is an act of contempt, which may be remedied by the Court pursuant to 11 U.S.C. § 105. In order to be found in contempt of a Court order, the movant must show: “(1) the existence of a valid decree of which the alleged contemnor had actual or constructive knowledge; (2) that the decree was in the movant’s ‘favor’; (3) that the alleged contemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violations; and (4) that the movant suffered harm as a result.” United States v. Under Seal (In re Grand Jury Subpoena), 597 F. 3d 189, 292 (4th Cir. 2010).
With respect to any violation of Bankruptcy Rule 2002(c)(3), the court held that even if there were a violation, the confirmation order is res judicata citing the Supreme Court in United States Aid Funds v. Espinoza.
Continuing in its analysis of debts reported to credit rating agencies, the court noted that other “Courts have held that the failure to correct the pre-discharge reporting of a debt on the debtor’s credit report, without additional evidence of some coercive efforts to collect the debt (phone calls, letters, etc.), does not rise to the level of a discharge injunction violation for which the creditor may be held in contempt.” Citing In re Dendy, 396 B.R. 171, 182 (Bankr. D.S.C. 2008), the Court denied the violation, stating “[t]he mere existence of a discharged debt on a debtor’s credit report, when reported prior to the discharge injunction and not combined with evidence of actions by a creditor to collect the debt after the injunction arose, does not rise to the level of action that violates a discharge injunction.”
It is important to note that the balance should be reported as zero upon receipt of the discharge even though there will not be an action in bankruptcy court for failure to report the balance as zero during the life of the Chapter 13 plan.
