Bankruptcy stops most collection efforts. There’s an automatic stay, an injunction, as soon as the case is filed. Then there is the discharge injunction, when the case is over. Those are the core protections you want and get by filing the bankruptcy case. That’s why you do it, right? The harassment is out of control. You’ve been pushed to the edge, and beyond.
But violations occur. Some creditors are careless, while others are reckless or just plain evil. Either way, you might still be harassed after your case is filed. That’s wrong. And you can get paid for being harassed.
When caught, a creditor may negotiate a settlement and want confidentiality. It doesn’t want the world to know that it’s evil, or it just doesn’t want to encourage more claims against it for its bad behavior.
Confidentiality of these settlement agreements in a bankruptcy case is not allowed in Massachusetts. The recent In re Blake decision came down heavily on the side of transparency, of public disclosure for the entire bankruptcy process (excepting certain privacy issues). The court ruled that a settlement of a bankruptcy violation is far different from private parties compromising a claim with private dollars. The public has a great stake in the integrity of the workings of its bankruptcy system. The people have a right to know.
The court exercised discretion and did not require public filing of the settlement agreement. It required the amount paid to be announced in open court and it refused to redact a later transcript request of that hearing.
This shouldn’t make settlements more difficult. Without a settlement, the violating creditor will have to pay far more in attorney fees – and for both sides if it loses. Avoiding unnecessary costs is the overriding business judgment.
Wrongdoing creditors can no longer hide under rocks. Debtors and the public alike are better served by bringing these violations to light.
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Last modified: May 27, 2011