09 Jun Letters Threatening “Share Loss” and “Loss of Services” Did Not Violate Bankruptcy Protection, Court Says
A Tennessee federal court recently approved of a credit union mailing letters to a chapter 13 bankruptcy debtor threatening loss of shares and suspension of services, ruling that such informational letters did not violate the protection against collection activity upon a bankruptcy debtor. In re Messick, 2010 WL 419992 (E.D.Tenn. Jan. 29, 2010), also held that when the debtor called the credit union on the telephone to ask about the letters, the credit union’s request for payment was not a violation either.
The court acknowledged other cases finding that similar letters were a violation of the bankruptcy protection, but distinguished them based upon the credit union’s policy of sending letters such as these to everyone who caused it to suffer a loss. It also credited the testimony of credit union personnel who stated that the purpose of the letters was informational only, rather than to coerce payment of a debt. The court found it significant that the credit union claimed that it was merely communicating truthful information to the debtor about it actual policies.
Furthermore, the credit union’s statements to the debtor on the telephone were discounted because the debtor had made the call to the credit union himself, rather than the credit union calling him. The credit union’s statement that to avoid loss of services, the debtor could reaffirm on the debt, was not, in the court’s opinion, coercive or threatening. The credit union simply informed the debtor of its policies, which did not amount to coercive action to compel repay of a debt.
The court did not address whether the credit union had sent the letters to the debtor with the intention that such action would inspire the debtor to phone the credit union, giving it the opportunity to discuss the matter with him in a such a way that repayment would be the likely result.
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