Tentative Ruling on Contempt for Violation of the Discharge Injunction

Judge Ted Albert’s usual excellent work.

United States Bankruptcy Court
Central District of California
Judge Theodor Albert, Presiding
Courtroom 5B Calendar
Santa Ana
Tuesday, December 09, 2014 Hearing Room 5B
11:00 AM

8:10-23458 Carlos Antonio Bernal Chapter 7
#14.00 Order To Show Cause RE: Contempt Against *************

This is a hearing on the OSC re contempt issued by the court 10/29/14 at the request of the debtor.  There is proof of service upon attorney Silverstein but not as to the other alleged contemnor, Grand Commerce Center, LLC.  Only attorney Silverstein has responded.  First, the discharge injunction is effective as to all discharged debts.  While Attorney Silverstein alleges that he was not listed in the petition and schedules, the certificate of notice dated 9/26/10 suggests that his client was.  Moreover, in no-asset cases all debts are discharged whether listed or not.  In re Heilman, 430 B.R. 213, 218 (9th Cir. BAP 2010).  Therefore, every aspect of the garnishment obtained on a judgment issued after the 1/13/2011 is potentially a contempt.  But unlike stay violations which make all violations automatically void, violation of the discharge injunction is treated as contempt, so damages and penalties resulting must be considered in terms of the willfulness of the violation.  Attorney Silverstein tries to make an issue of the corporate vs individual status under §362(k), but this is misplaced since clearly the debtor (which is the only status that matters) is an individual, and discharge injunction violations are judged on a different standard anyway.  Attorney Silverstein submits a declaration indicating he knew nothing about the bankruptcy and stopped immediately the garnishment once he learned of it. He also mentions the monies garnished were refunded or never obtained (it is unclear which).  But the exact timing of all of this is left vague.  The court notes that several wage statements are attached as exhibits showing that garnishments continued for several pay periods including as late as 9/26, although Mr. Spector’s letter to attorney Silverstein is dated August 8, 2014.  So, absent another explanation, it would seem at the very least that Attorney Silverstein was slow in responding. Also conspicuously absent in Attorney Silverstein’s papers is any recognition that ongoing garnishment imposes a real hardship on a debtor struggling to obtain his fresh start. Lastly, the court expects attorneys, particularly ones involved in debt collection practice who must know of these principles, will adhere to higher standards. Different considerations (and potentially higher consequences) may apply as to Grand Commerce, if service can be effected.

Damages equal to attorney’s fees and reopening fee incurred post discharge.

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