Yen v. Pedroche (In re Pedroche)

BAP No. NC-13-1618-JuKuPa (determined not to be appropriate for publication)
A bankruptcy court is required to hold an evidentiary hearing on whether a creditor is aware of a discharge injunction and whether the creditor is aware that the injunction applies to the creditor's claim before it may impose a contempt sanction for violation of the discharge injunction. The BAP determined that the record was void of whether Yen knew of the discharge injunction and whether the discharge injunction was applicable to his claim. The BAP vacated and remanded the Bankruptcy Court’s Order finding contempt and determining sanctions.
Procedural context:
The judgment creditor appealed from a bankruptcy court order finding him in contempt for violating the §524 discharge injunction and awarding the debtor compensatory damages of $8,400 and punitive damages of $8,000. The Bankruptcy Court's Order was reviewed for abuse of discretion.
Yen received a default judgment against Ricardo for $11,760. The next day Ricardo ("Ricardo" or "Debtors") filed a bankruptcy petition. Ricardo inadvertently failed to list Yen on his schedules. Three days after the bankruptcy was filed Yen recorded a judgment against Ricardo. Ricardo was not aware of the judgment lien when his discharge was obtained in July of 2010. When Ricardo became aware of the judgment lien he moved to re-open the bankruptcy case. The Bankruptcy Court voided Yen's judicial lien under §362. The day after receiving the Order voiding the lien, Yen re-recorded the judgment lien. The Debtors again re-opened their case and filed a motion for contempt alleging violation of the §524 discharge injunction. Each side filed declarations as part of the contempt briefing; Yen asserted in his declaration that the debt was non-dischargeable. The Bankruptcy Court based on declarations only, entered an Order granting the contempt motion.
Jury, Kurtz, and Pappas.

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