When a debtor petitions for bankruptcy protection, the Court automatically issues a protective order sometimes referred to as an “automatic stay.” The automatic stay prohibits creditors from continuing collection activities such as calling debtors, mailing debtors or proceeding with lawsuits against debtors. In fact, creditors are required to stop all forms of contact with debtors after a bankruptcy petition has been filed.
At the conclusion of a bankruptcy proceeding and after a debtor has received a discharge of his or her debts, the Court orders a discharge injunction. This means that creditors that were listed and noticed in the bankruptcy proceeding are forever barred from collecting the discharged debt. If a creditor violates the discharge injunction, the bankruptcy court has jurisdiction to hear the matter and issue sanctions against the offending creditor if warranted.
Wells Fargo Bank N.A. was ordered to pay $69,500 to a debtor for repeated violations of the discharge injunction in April, 2015. Sometime after the debtor received a discharge in his Chapter 7 bankruptcy, Wells Fargo began calling the debtor regarding a debt that was included in the debtor’s bankruptcy. Wells Fargo made 139 attempts to collect the discharged debt. The debtor’s attorney contacted Wells Fargo regarding the debtor’s bankruptcy and discharge and followed up with a letter outlining Wells Fargo’s collection efforts over a period of two years. Wells Fargo acknowledged the attorney’s letter through a letter sent directly to the debtor stating that “as you were the only person who signed the Note, Wells Fargo holds you financially responsible for repayment of the loan.”