SCOTUS Protects Consumers In Taggart Case

SCOTUS Protects Consumers In Taggart Case

Theron Morrison and his fellow attorneys at the Morrison Law Group keep a vigilant eye on the important legal happenings taking place all over the U.S., whether it is enacted or proposed legislation by Congress or an important case decided by the Supreme Court (SCOTUS).

In Taggart v. Lorenzen, the Supreme Court addressed, for the first time, an issue related to enforcement of an individual’s bankruptcy discharge. It ruled 9-0 that a creditor who violates a bankruptcy discharge may be held in civil contempt if a judge rules that it was objectively obvious that collecting the debt was engaging in wrongful conduct.

Although the Taggart case is not groundbreaking, it is pro-debtor and signifies that violations by creditors after a debtor receives a discharge will face stricter legal scrutiny.

Bankruptcy debtors who successfully complete the requirements under federal bankruptcy law in Title 11 (aka the Bankruptcy Code) typically receive a discharge of most or all their debts at their case’s completion. Once a debtor is issued a discharge, creditors violate it at their own risk.

The creditor in Taggart argued that a subjective standard should apply when creditors are alleged to have violated a former debtor’s discharge order. By a subjective standard, a creditor would only be subject to liability if it believed that trying to collect was an illegal, wrongful act.

The Supreme Court unanimously rejected this argument. The Supreme Court compared and equated the violation of a bankruptcy discharge with contempt-of-court proceedings in ordinary civil cases. The Court stated: “A party’s subjective belief that she was complying with an order ordinarily will not insulate her from civil contempt if that belief was objectively unreasonable.”

It further reasoned that objective evaluations of wrongdoing should be applied to creditors who attempt post-bankruptcy collection. It held that “a court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.” Creditors trying to collect from someone who received a discharge, beware.

Theron Morrison cares about protecting your rights, especially when creditors try to collect a debt illegally, especially after the debt has been discharged in a bankruptcy case. Talk to the Morrison Law Group about your Chapter 7 or Chapter 13 bankruptcy options. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.

Theron Morrison

Theron Morrison

Utah’s top bankruptcy and consumer protection attorney.