Where a plaintiff has brought suit under the Fair Debt Collection Practices Act claiming that letters the defendants sent were an attempt to collect a discharged debt and to enforce a non-existent lien stemming from a defaulted second mortgage loan, a motion by the defendants for judgment on the pleadings must be denied based on the fact that the second mortgage lien was stripped off in the plaintiff’s bankruptcy proceeding.
“Plaintiff Marta Escamilla alleges defendants Dyck-O’Neal, Inc. (‘DONI’) and Bendett & McHugh, P.C. (‘BMPC’) violated the Fair Debt Collection Practices Act (‘FDCPA’), 15 U.S.C. §§1692f, 1692g, and the discharge injunction, 11 U.S.C. §524(a). … Plaintiff claims that letters that defendants sent to plaintiff were an attempt to collect a discharged debt and to enforce a non-existent lien stemming from a defaulted second mortgage loan. The debt had been discharged in bankruptcy and plaintiff claims the lien was ‘stripped off’ in the bankruptcy case. At this stage, defendants do not dispute that the loan was ‘stripped.’ …
“Plaintiff’s allegations are sparse. As mentioned, defendants presently do not dispute that the second mortgage lien was stripped off in the bankruptcy proceeding. Given that assumption, the facts do not establish that defendants are entitled to the relief sought. The Rule 12(c) motion is therefore denied. …
“The court rejects defendants’ argument that there are insufficient facts in the record from which plausibly to infer coercion. …
“Assuming without deciding that actual notice is necessary, there are sufficient facts in the record from which one may plausibly infer that defendants had actual notice of the discharge order. …
“Defendants do not address the abundant authority in this circuit and the majority of circuits that, in Chapter 13 bankruptcy cases, a debtor has the ability to ‘strip off’ a mortgage lien that is found to have no value because the amount of a senior mortgage lien and encumbrances exceed the value of the residence. …
“Defendants have not cited authority to support the conclusion that a Chapter 13 discharge order typically would refer to the treatment of a second mortgage loan or that an objectively reasonable creditor does not refer to the plan. …
“For the reasons set out above, … defendants’ joint motion for judgment on the pleadings is denied. If plaintiff seeks to add class action claims for violation of the discharge injunction, … the parties must submit supplemental briefing addressing the recent decision in Bruce v. Citigroup Inc., 75 F.4th 298 (2d Cir. 2023), holding that a bankruptcy court’s civil contempt authority does not extend to other bankruptcy courts’ discharge orders. …”
Escamilla v. Dyck-O’Neal, Inc., et al. (Lawyers Weekly No. 02-315-24) (42 pages) (Kelley, U.S.M.J.) (Civil Action No. 22-11001-MPK) (July 10, 2024).
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