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Eleventh Circuit Court of Appeals Maintains Mortgage Statements Don't Violate Bankruptcy Code

Posted By USFN, Monday, October 14, 2019
Updated: Thursday, October 10, 2019

by Louise Johnson, Esq.
Scott & Corley, P.A.
USFN Member (SC)

In Roth v. Nationstar Mortgage, LLC No. 17-11444 (11th Cir. 2019), the 11th Circuit Court of Appeals held that a mortgage statement sent for “informational purposes only” and with appropriate disclaimers on a discharged mortgage debt was not a violation of § 524 of the Bankruptcy Code.

The underlying facts of the case are not unusual nor uncommon.  The defendant’s Chapter 13 Plan provided that secured creditors would retain their liens.  Nationstar was the servicer (“servicer”) for one of those secured creditors whose mortgage lien “survived” the bankruptcy discharge.

The Bankruptcy Court entered the discharge order which effectively prohibited creditors from attempting to collect the discharged debt.  After the entry of the discharge order, the servicer sent Roth certain mortgage statements (“statements”) containing express disclaimers that the statements were for informational purposes only, and that the statements were not an attempt to collect a discharged debt. The statements included an “amount due,” “due date,” and that statements about the negative escrow balance does not diminish the effect of the prominent, clear, and broadly worded disclaimer.  The servicer continued to send such statements even after Roth’s attorney sent the Servicer a cease and desist letter. On appeal Roth raised the issue of whether the servicer’s statements, after the discharge, was an improper attempt to collect a debt in violation of 11 U.S.C. § 524, justifying sanctions against the Servicer.

Roth argued that the FDCPA standard of “debt collection” should apply, rather than the bankruptcy court standard of what constitutes “debt collection.”[1] The FDCPA standard for determining if a communication is a debt collection is whether the statement would “mislead the least sophisticated consumer regarding the nature of her rights.”  Section 524(a)(2) of the bankruptcy code provides that a discharge of debt in a bankruptcy proceeding “operates as an injunction against the commencement or continuation collect...any such [discharged] debt.” 11 U.S.C. § 524(a)(2). The court in Roth applied the Bankruptcy standard, finding that when determining if the Informational Statement was an unlawful debt collection in violation of §524 “the objective effect” must be used, looking specifically to see if the informational Statement was used “to pressure the defendant to repay the discharged debt.” The Court emphasized that what counts as “debt collection” under one statutory scheme is not necessarily “debt collection” under the other; finding here that no debt collection attempt was present.

The 11th Circuit affirmed the lower Court’s ruling that the Statements did not violate § 524, as said Statements, with the appropriate disclosures, did not constitute an attempt to collect a debt.  Of special importance, the Roth Court declined to apply the FDCPA’s “least sophisticated consumer” standard when evaluating the Statements under § 524 of the bankruptcy code.  Rather, the Roth Court utilized a more objective standard of whether there was more than a “fair ground of doubt” as to whether the discharge order barred the servicer’s conduct.


[1] The FDCPA creates a civil cause of action based on certain prohibited debt collection methods, specifically a “false, deceptive, or misleading representation or means in connection with the collection of any debt” or an “unfair or unconscionable means” of debt collection. 15 U.S.C. § 1692e–f.

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