Hann v. Educational Credit Management Corp. (In re Hann)

BAP No. NH 11-084
Affirming the bankruptcy court, the BAP held that (1) student loan creditor was bound by bankruptcy court’s determination (after an evidentiary hearing on debtor’s objection to claim that the creditor failed to attend, despite adequate notice) that the debtor had paid otherwise nondischargeable student loan debt in full pre-petition, and that the amount of creditor’s claim was $0.00; (2) creditor’s post-discharge attempts to collect student loans, on basis that disallowance of claim did not equate to nonexistence of nondischargeable debt, violated discharge injunction; (3) res judicata precluded creditor from litigating the amount of the debt in context of discharge violation proceeding, since the court previously determined the amount of the debt to be zero.
Procedural context:
Debtor reopened chapter 13 case to enjoin and sanction creditor for post-discharge efforts to collect student loan debt previously determined to have been paid in full. Creditor appealed from orders granting summary judgment to debtor.
Hann, the debtor, filed a chapter 13 bankruptcy case. Educational Credit Management Corp. (ECMC) filed a proof of claim alleging that she owed $55,000 in student loans. Hann disagreed, and objected to the claim because she believed that the student loan had been paid in full pre-petition. ECMC did not respond to the claim objection. The bankruptcy court, however, conducted an evidentiary hearing, and determined that Hann had paid the student loans in full pre-petition. It therefore determined that the debtor owed ECMC $0.00, and sustained the debtor’s objection to the claim; dischargeability was not at issue in the claims objection proceeding. Post-discharge, ECMC began aggressive collection tactics. Hann reopened the bankruptcy case and commenced the adversary proceeding for damages for the discharge violation. The bankruptcy court rejected ECMC's position that because the student loans were not discharged, it could resume post-discharge collection efforts, even if the claim had been disallowed. Instead, the bankruptcy court focused on the fact that it had found that Hann owed ECMC $0.00, and that since there was no debt, there could be no liability on a claim, essentially mooting the dischargeability issue. The court also found that, having ignored the claims objection process, ECMC was bound by res judicata that no debt was owed. It awarded Hann damages pursuant to §105, including attorneys’ fees.
BAP Judges Hillman, Feeney and Hoffman. Decision authored by Hoffman

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