MORTGAGE STATEMENT WITH CLEAR DISCLAIMER | Key Points
- The Eleventh Circuit recently affirmed the bankruptcy court’s denial of a sanction motion filed by a debtor/mortgagor (“Roth”) against Nationstar, Roth’s mortgage company. In re Roth, 935 F.3d 1270, 1273 (11th Cir. 2019). Roth asserted Nationstar violated 11 U.S.C. § 524 by sending her monthly mortgage statements after a bankruptcy court had discharged her mortgage debt in chapter 13 bankruptcy proceedings. Section 524 of the bankruptcy code prohibits a creditor from taking action to collect a discharged debt. 11 U.S.C. § 524(a)(2).
- Relying heavily on the disclaimer included in Nationstar’s mortgage statement, on appeal the U.S. Appeals Court for the Eleventh Circuit concluded the objective effect of Nationstar’s mortgage statement was not “to pressure Roth to repay a discharged debt” but rather to provide “potentially helpful” information about how Roth could “regain the property” if she so chose. The Court concluded since Nationstar’s statement did not violate § 524, the ‘no fair ground of doubt’ standard for § 105” established by the Supreme Court in Taggart v. Lorenzen, was not satisfied and the bankruptcy court’s denial of Roth’s motion for sanctions was proper.
- The takeaway here is to ensure any communications going to a borrower who obtained a discharge of debt in bankruptcy has a “prominent, clear, and broadly worded disclaimer” like the one Nationstar used in this case. The text of that disclaimer is included in the full article.