Court Rejected Ditech’s Defense to Discharge Violation in Which It Claimed Computer Generated Statements Sent to Debtor Were Not Willful

Robert Wilbert | Latest News | April 29, 2017

The Debtor testified that RCS notified him that on June 1, 2016, Ditech would begin servicing the Note. A Ditech representative contacted the Debtor in June by phone and informed him that according to Ditech’s records, the Debtor was $2,000.00 in arrears on the Note. The representative attempted to collect payment from the Debtor at that time. The Debtor was assigned a Ditech account representative, but despite repeated calls to the initial representative, the Debtor was unable to reach anyone to discuss the alleged arrears. Ditech subsequently sent multiple letters to the Debtor informing him of various account representatives assigned to his account. In one instance, Ditech assigned a new account representative less than two weeks after assigning a prior representative.

The Court concluded that Ditech violated the Discharge Injunction.

The willfulness prong of the Fourth Circuit’s test for sanctions “requires only that the acts taken in violation of the injunction be intentional.” In re Fina, 550 Fed. Appx. at 154. Courts have compared this willfulness element to willfulness in the context of a stay violation, requiring an intentional act with knowledge of the discharge injunction. See id. Ditech intentionally acted when it mailed statements to the Debtor, and Ditech’s representatives acted intentionally any time they sought to elicit payment from the Debtor for the alleged arrears over the phone. To the extent the statements that Ditech mailed to the Debtor were computer generated, the sending of those correspondence nevertheless constitutes a willful act. See In re Ennis, 2015 Bankr. LEXIS 3657 (Bankr. E.D.N.C. Oct. 28, 2015). The court also notes that Ditech remains culpable even though it was not the servicer for the Note when the arrears were discharged and Ditech never received the Discharge Order. When a note or other obligation is transferred, the successor in interest is responsible for ensuring records are properly transferred. Moreover, Ditech became aware of the Debtor’s bankruptcy once the Debtor explained that he had cured arrears through his Chapter 13 Plan. Ditech is in contempt of the Discharge Order.

The Debtor was adversely affected by Ditech’s correspondence and failure to explain adequately the alleged delinquency on the Note. The Debtor’s testimony was extremely credible as he described the eight months he has spent trying to rectify this matter. Ditech’s predecessors in interest maintained an active presence in the Debtors’ case, and Ditech is a sophisticated lender familiar with bankruptcy proceedings and the United States Bankruptcy Code. Ditech’s failure to rectify its records without the involvement of this court is unacceptable. The Debtor should be awarded actual damages as compensation for the nuisance and frustration related to the receipt of the correspondence and phone call from Ditech, as well as for time spent dealing with Ditech representatives, documenting payments, contacting counsel about the correspondence and appearing in court. The Debtor incurred expenses related to sending proof of payment to Ditech and his counsel, as well as travel expenses. The appropriate amount of damages to award to the Debtor is $10,000.00.

In re Greene (Bankr EDNC April 27, 2017)