A District Court judge in California has granted a defendant’s motion to dismiss after it was accused of violating the Fair Debt Collection Practices Act and the Rosenthal Fair Debt Collection Practices Act by attempting to collect on a debt that had been discharged in bankruptcy.
The background: The plaintiff filed this lawsuit accusing the defendant of improperly renewing a judgment that had been discharged during a prior Chapter 7 bankruptcy. The debt in question was originally tied to a judgment obtained in 2013 in Sonoma County Superior Court. After the plaintiff filed for bankruptcy in 2014, the bankruptcy court granted a discharge, effectively wiping out the plaintiff’s obligation to pay the debt.
- Despite this, the defendant sought to renew the monetary judgment in 2022, leading the plaintiff to discover the renewed lien while attempting to sell property and obtain financing in 2024.
The ruling: Once the bankruptcy discharge was granted in 2014, the automatic stay that prevents creditors from pursuing collection efforts was lifted, noted Judge Jacqueline Scott Corley of the District Court for the Northern District of California. Therefore, there was no continuing stay for the defendant to violate.
- The plaintiff also attempted to argue that the defendant’s actions violated Section 524 of the Bankruptcy Code, which enforces discharge injunctions. However, Judge Corley noted that there is no private right of action under Section 524. Instead, any violations of discharge injunctions must be addressed by seeking contempt remedies in the bankruptcy court itself, not by filing a separate lawsuit in district court.
- Consequently, the plaintiff’s claims under the FDCPA were also dismissed, as they were based on the alleged violation of the discharge injunction, which must be pursued through the bankruptcy court.
- The remaining state law claims, including violating the RFDCPA, slander of title, and intentional infliction of emotional distress, were dismissed without prejudice, allowing the plaintiff to potentially refile these claims in state court. Judge Corley noted that the case was in its early stages, and no discovery had yet taken place, making it more appropriate for the state court to address these issues.
