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March 24, 2003


The opinion of the court was delivered by: Matthew F. Kennelly, District Judge.


Tate & Kirlin Associates, a collection agency, sent a collection letter to Cheryl Hyman, who, unbeknownst to T&K, had filed a petition for protection in the United States Bankruptcy Court. Because of that letter, Hyman sued Dick Tate and Harry Kirlin, who together operate T&K, alleging violations of the Fair Debt Collection Practices Act. After denying cross motions for summary judgment, the Court held a bench trial on February 28, 2003. This memorandum opinion and order sets forth the Court's findings of fact and conclusions of law in satisfaction of Rule 52 of the Federal Rules of Civil Procedure.

Findings of Fact

On January 14, 2000 Cheryl Hyman filed a Chapter 13 petition in the United States Bankruptcy Court for the Northern District of Illinois. The list of debts attached to her petition included a $437.61 debt owed to Cross Country Bank (CCB) for credit card purchases. As a listed creditor, CCB received notice of the bankruptcy case in late January 2000; the bankruptcy court also sent notice to Simms Associates, which was a collection agency apparently working Hyman's account for CCB at the time. The bankruptcy court confirmed Hyman's Chapter 13 Plan on May 18, 2000; on September 6, 2001, the court entered a corrected order confirming the plan. Under the terms of the plan, Hyman was to pay 100% of her secured and unsecured claims over a period of 36 months.

On September 7, 2001, CCB referred Hyman's account to Tate & Kirlin Associates for collection. On September 11, 2001, T&K sent Hyman a letter seeking to collect the debt owed to CCB. The letter offered Hyman two options to help her satisfy her account: a "reinstatement program," which required Hyman to pay the debt in full in exchange for CCB issuing a new credit card with a new line of unsecured credit, and a "settlement program," which allowed Hyman to close the matter for $256.57. The letter advised Hyman that she had the right to dispute the validity of the CCB debt and that she had the right to request and obtain verification of the debt. A few weeks after she received the letter, Hyman called T&K to report that she had filed for bankruptcy protection. The collector who took Hyman's call asked her some follow-up questions (the case number, the chapter under which Hyman had filed her petition, and the name of her attorney) and then took the necessary steps to close Hyman's account. T&K made no further attempts to collect on Hyman's account and officially closed it on November 21, 2001.

On January 10, 2002, Hyman sued Dick Tate and Harry Kirlin, d/b/a Tate & Kirlin Associates, alleging violations of the Fair Debt Collection Practices Act. Specifically, Hyman alleges that the defendants violated §§ 1692e and f of the FDCPA, because attempting to collect a debt that was subject to a pending bankruptcy is both false, deceptive or misleading (as prohibited by 15 U.S.C. § 1692e), and unfair and unconscionable (as prohibited by 15 U.S.C. § 1692f). In her complaint, Hyman also alleged that the defendants violated § 1692c(a)(2) of the FDCPA when it sent her the letter even though she was represented by an attorney; shortly before trial, Hyman withdrew this claim, leaving only the §§ 1692e and f claim.

On July 19, 2002, the bankruptcy court entered an order discharging Hyman from her debts; the bankruptcy case was closed on August 2, 2002.

Conclusions of Law

A. The Impact of Cox

As an initial matter, we consider whether Hyman is entitled to pursue an FDCPA claim in this court. In response to a cursory argument by T&K in its motion for summary judgment, the Court briefly considered whether Hyman's claims were precluded by the Bankruptcy Code. We recognized that Cox v. Zale Delaware, Inc., 239 F.3d 910, 915-16 (7th Cir. 2001), requires certain types of claims to be brought in the bankruptcy court, not in the district court. Hyman v. Tate & Kirlin, No. 02 C 242 (N.D.Ill. Nov. 1, 2002). But we also recognized that Hyman's claim was different from the claim raised in Cox, and we therefore declined to close the door on Hyman, especially because T&K made no effort to explain how the differences in the claims would, or should as a practical matter, affect our analysis. Id. Relying on a recent district court decision that appears to be directly on point, T&K again raised the issue during closing arguments at trial, and we therefore think it prudent to delve a bit deeper into the question of whether this case should even be here.

Cox involved a debtor who, after filing a voluntary petition for bankruptcy, signed a reaffirmation agreement covering a debt he owed to Zale for a ring he had purchased on credit. Zale failed to file the reaffirmation agreement with the court, which, under § 524(c) of the Bankruptcy Code, 11 U.S.C. § 524(c), is a necessary prerequisite for making the agreement valid and enforceable. As a result, when the bankruptcy court entered its discharge order, Cox's Zale debt was discharged along with the rest of his non-reaffirmed debts. Nevertheless, Cox paid off the debt, consistent with the reaffirmation agreement. He later filed a class action suit in district court, alleging violations of 11 U.S.C. § 524(c); 11 U.S.C. § 524(a)(2), which enjoins actions to collect a discharged debt; 11 U.S.C. § 362, concerning the automatic stay of collection efforts that applies during a pending bankruptcy case; and various state law theories (but no FDCPA claim). See Cox v. Zale Delaware, Inc., No. 97 C 4464, 1998 WL 397841, at *1 (N.D.Ill. July 13, 1998). The district court held that the § 524 claims could be brought only in bankruptcy court, and it dismissed the state law claims as preempted by the Bankruptcy Code's § 524 remedy; it dismissed the claim for violation of the automatic stay "in the exercise of . . . judicial discretion," believing it more efficient for the bankruptcy court to deal with that claim too. Id. at *5.

On appeal, the Seventh Circuit was not asked to deal with the automatic stay issue. On the § 524 claims, the court held that § 524(c), which lists the requirements for a valid reaffirmation agreement, does not create an action for damages and that a suit for violation of that section can be brought only as a contempt action under § 524(a)(2) of the Code, which enjoins any action to collect or recover a discharged debt. Cox, 239 F.3d at 913-14, 917. In reaching this conclusion, the court first cited with approval two cases holding that "remedies against debt-affirmation agreements contended to violate the Bankruptcy Code are a matter exclusively of federal bankruptcy law." Id. at 913 (citing Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 426 (6th Cir. 2000); Bessette v. Avco Financial Services, 230 F.3d 439, 447-48 (1st Cir. 2000)). Thus Cox, who sought to rescind the reaffirmation agreement, was required to sue in the bankruptcy court for violation of § 524(a)(2)'s injunction against collection activity on discharged debts; that remedy, the court held, was exclusive and rightfully so, as it "plac[ed] responsibility for enforcing the discharge order in the court that issued it." Cox, 239 F.3d at 916. This made sense, according to the court, because the court that issued the discharge order was in a better position than the district court "to adjudicate the alleged violation, assess its gravity, and on the basis of that assessment formulate a proper remedy." Id.

Peeples v. Blatt, No. 00 C 7028, 2001 WL 921731 (N.D.Ill. Aug. 15, 2001), presented a situation similar to Cox. The plaintiffs signed "redemption agreements," pursuant to which they agreed to keep paying for merchandise they purchased from Sears on credit even though their debts to Sears had been discharged in bankruptcy. In exchange, Sears agreed to let them keep the merchandise. Sears, however, never filed the agreements with the bankruptcy court. The plaintiffs sued Sears, alleging violations of both the Fair Debt Collection Practices Act and the discharge injunction contained in § 524(a)(2) of the Bankruptcy Code. Sears moved to dismiss the complaint, arguing among other things that, under Cox, the plaintiffs' exclusive remedy was in the bankruptcy court. Id. at *4. The district court disagreed because "Cox did not discuss the issue of whether the Bankruptcy Code precludes actions based on other federal statutes, such as the FDCPA. Cox held that the Bankruptcy Code preempted state law claims premised on violations of the Code." Id. Based on this, the court denied the motion to dismiss and allowed the plaintiffs' FDCPA claim to proceed; the court dismissed the claim for violation of § 524, however, recognizing that under Cox the sole remedy for such a violation is a contempt action in the bankruptcy court. Id. at *5.

Bolen v. Bass & Associates, No. 97 C 3944, 2001 WL 1249058 (N.D.Ill. Oct. 17, 2001), also involved a reaffirmation agreement. As in Cox and Peeples, the plaintiff had filed for bankruptcy protection but signed a reaffirmation agreement so that she could keep a refrigerator, stove and VCR she had purchased on credit from Best Buy. Best Buy never filed the reaffirmation agreement with the bankruptcy court, and the agreement was therefore unenforceable. Despite this, Best Buy's representative took steps to collect payments under the agreement, and Bolen sued, alleging that by seeking to collect on a debt that had been discharged in bankruptcy, the representative, Bass & Associates, violated §§ 1692e and f of the FDCPA. Bass moved for summary judgment, arguing that the district court lacked jurisdiction to decide the claim because, under Cox, the claim could only be pursued in the bankruptcy court. The district court agreed "in light of the direct holding in Cox `that a suit for violation of section 524(c) can be brought only as a contempt action under section 524(a)(2). . . .'" Id. at *3. The court rejected the claim, in large part, because allowing Bolen's claim — which was predicated on the creditor's failure to satisfy its obligations under § 524(c) of the Bankruptcy Code ...

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