In the recent decision of Taggart v. Lorenzen, the Supreme Court held that a court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.
What does no fair ground of doubt mean?
The Supreme Court has provided some guidance indicating that “civil contempt may be appropriate when the creditor violates a discharge order based on an objectively unreasonable understanding of the discharge order or the statutes that govern its scope.”
As with most laws, ignorance and good faith is not a defense – a creditor cannot be insulated from a finding of civil contempt for taking actions in violation of the discharge injunction if the creditor unreasonably believed that the discharge order does not apply to the creditor’s claim.
The take away? Consult an attorney well versed in bankruptcy law before pursuing any claims against individuals or entities where you know they filed a bankruptcy.
Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout, foreclosure disputes, preference/fraudulent transfers, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.