In the
United States Court of Appeals
For the Seventh Circuit
No. 08-4288
JAMES A. R EDMOND,
Plaintiff-Appellant,
v.
F IFTH T HIRD B ANK, f/k/a P INNACLE B ANK,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 08-cv-00961—Blanche M. Manning, Judge.
D ECIDED 1 O CTOBER 20, 2010
Before E ASTERBROOK, Chief Judge, and K ANNE and
S YKES, Circuit Judges.
S YKES, Circuit Judge. In 1996 James Redmond defaulted
on his home mortgage and filed for Chapter 13
1
Oral argument was scheduled for September 25, 2009.
Redmond filed an emergency motion to reschedule argument
on September 24, 2009. We vacated oral argument and
now decide the case on the briefs. See F ED . R. A PP . P. 34(B );
7 TH C IR . R. 34(e).
2 No. 08-4288
bankruptcy protection against his lender Pinnacle Bank
(“Pinnacle”), now known as Fifth Third Bank. The bank-
ruptcy court entered an Agreed Order, pursuant to
which Redmond made monthly payments and owed a
“balloon payment” for the balance of the mortgage on
April 1, 1998. To obtain financing for this balloon pay-
ment, Redmond requested a payoff letter from Pinnacle
detailing his debt obligations. Redmond disputed the
charges in the payoff letter and subsequently failed to
secure a loan to cover the payment. He then defaulted
for a second time, and Pinnacle initiated state fore-
closure proceedings. Redmond moved to reopen his
bankruptcy case in 2005, four years after it had been
closed and three weeks before trial in the state fore-
closure suit. He contended that the charges Pinnacle
was seeking in the foreclosure suit were in violation of
the bankruptcy court’s orders and the automatic stay.
The bankruptcy court denied the motion, and a year
later Redmond filed a second motion to reopen along
with a motion for sanctions against Pinnacle for violating
the terms of the bankruptcy plan. These motions, too,
were denied. The case shuttled back and forth between
the district court and the bankruptcy court, and when
the denial of reopening was finally affirmed, Redmond
appealed to this court.
We affirm. Bankruptcy judges are given broad discre-
tion to reopen closed bankruptcy cases, and we see no
abuse of discretion here. The bankruptcy judge declined
to reopen on multiple appropriate grounds: The motion
was not timely, the state court was an appropriate forum
to litigate Redmond’s potential claims, and his bank-
No. 08-4288 3
ruptcy arguments were in any event meritless.
Further, Redmond was not denied a fair hearing; the
bankruptcy judge gave him ample opportunity to
present his claims.
I. Background
In February 1996 James Redmond defaulted on his
home mortgage, and Pinnacle initiated foreclosure pro-
ceedings. Redmond staved off foreclosure by filing
for Chapter 13 bankruptcy protection. The bankruptcy
judge entered an Agreed Order, which reduced Pin-
nacle’s arrearage, stayed foreclosure proceedings, and
required Redmond to make monthly payments on the
mortgage in addition to a final balloon payment on
April 1, 1998.
As the April 1 deadline approached, Redmond sought
to refinance his mortgage to cover the upcoming
balloon payment. Redmond requested a payoff letter
from Pinnacle so that he could close on the refinance
loan in time to pay the balloon note. Pinnacle provided
two payoff letters—the second containing a higher
payoff amount than the first. Redmond demanded an
explanation of the charges; he claims that due to Pinnacle’s
failure to explain the difference, he could not refinance
his mortgage. Redmond then failed to make the balloon
payment and defaulted on the mortgage for a second
time, after which Pinnacle initiated a second foreclosure
suit in state court. (Pinnacle contended, and the bank-
ruptcy judge agreed, that the automatic stay as to Pinna-
cle’s mortgage lien dissolved when Redmond did not
4 No. 08-4288
make the balloon payment. 2 ) Redmond received a bank-
ruptcy discharge in May 1999, and his case was closed
in May 2001.
After seven years of litigation, the state foreclosure
proceedings were slated for trial on July 18, 2005. On
June 30, 2005, three weeks before the trial date and four
years after his bankruptcy case had been closed, Redmond
filed a motion to reopen the bankruptcy proceedings.
Redmond claimed that Pinnacle was seeking through its
payoff letters and the foreclosure action to recover fees
above what it was owed under the Agreed Order and
the bankruptcy plan. On July 12, 2005, Redmond’s
counsel made an appearance to argue the motion, and
the bankruptcy judge denied it on the ground that the
state court could properly entertain his claims.
Meanwhile, Pinnacle filed a pleading in the state-court
foreclosure proceeding in which it disclosed the specific
sums at issue in the 1998 payoff letters. This prompted
Redmond to file a second motion to reopen in
2006—almost a year after the court had denied his first
one. This time he included a request for sanctions for
alleged violations of the bankruptcy court’s orders. At a
June 29, 2006 hearing, the bankruptcy court denied the
2
Redmond argued that the automatic stay could not have
been lifted at the time the balloon payment was due on April 1,
1998, because Pinnacle gave him no notice. The bankruptcy
court rejected this argument, concluding that under the
Agreed Order, the stay dissolved automatically and did not
require notice.
No. 08-4288 5
motion, finding that Redmond’s dispute with Pinnacle
over the amount owed under the mortgage did not impli-
cate any bankruptcy order. Redmond appealed, and
the district court reversed and remanded with instruc-
tions to consider whether Pinnacle had improperly
sought payment of prepetition debts prohibited by the
Agreed Order.3 On remand the bankruptcy court again
denied the motion. 4 The judge held that (1) the motion
was untimely; (2) any remaining issues could be re-
solved in the state-court proceedings; and (3) Redmond’s
bankruptcy arguments were facially meritless.
Redmond again appealed, claiming that the bank-
ruptcy judge had not followed the district court’s remand
instructions.5 This time the district court affirmed the
3
Before issuing its remand order, the district court dismissed
Redmond’s appeal for lack of prosecution and then sanctioned
Redmond’s counsel for needlessly causing Pinnacle to litigate
his motion to vacate the dismissal. The district judge later
reinstated the appeal.
4
The bankruptcy court continued a hearing three times
before denying the motion to reopen. The docket does not
indicate why the court continued the hearing three times,
but during this intervening time period, one of Redmond’s
attorneys withdrew at his request, which may have ac-
counted for some of the delay.
5
On appeal the district judge admonished both parties that
the failure to file timely briefs would result in dismissal and
requests for extensions of time would be strongly disfavored.
Redmond then filed (and was granted) two extensions of time
(continued...)
6 No. 08-4288
bankruptcy court’s order denying the motion to re-
open. Redmond appealed, and on the eve of oral argu-
ment before this court, he filed an “emergency” motion
to reschedule the argument. We vacated the oral argu-
ment and took the case on the briefs.
II. Discussion
Redmond challenges the bankruptcy court’s denial of
his second motion to reopen his closed bankruptcy case.
The decision to reopen a bankruptcy case is within the
broad discretion of the bankruptcy court. In re Bianucci,
4 F.3d 526, 528 (7th Cir. 1993). A bankruptcy court may,
for example, reopen a case for “the correction of errors,
amendments necessitated by unanticipated events that
frustrate a plan’s implementation, and the need to
enforce the plan and discharge.” In re Zurn, 290 F.3d 861,
864 (7th Cir. 2002) (citations omitted). Although we
review de novo the district court’s affirmance of the
bankruptcy court’s order denying the motion, the bank-
ruptcy court’s order itself is entitled to deference; the
denial of a motion to reopen a closed bankruptcy case
is reviewed for abuse of discretion. See In re Ingersoll,
Inc., 562 F.3d 856, 863 (7th Cir. 2009) (“We review a
district court’s decision to affirm the bankruptcy court
de novo, which allows us to assess the bankruptcy
5
(...continued)
to file his initial brief. Despite these extensions, Redmond
filed his brief four days late, and it was twelve pages over
the page limit.
No. 08-4288 7
court’s judgment anew, employing the same standard
of review the district court itself used.” (citations omit-
ted)). A bankruptcy judge may consider a number of
nonexclusive factors in determining whether to reopen,
including (1) the length of time that the case has been
closed; (2) whether the debtor would be entitled to relief
if the case were reopened; and (3) the availability of
nonbankruptcy courts, such as state courts, to entertain
the claims. See In re Antonious, 373 B.R. 400, 405-06
(Bankr. E.D. Pa. 2004).
As a threshold matter, Redmond’s contention that the
bankruptcy court did not afford him a full and fair
hearing is without basis in law or fact. As a matter of
law, there is no question that bankruptcy courts may
rule on motions to reopen without a hearing. See In re
Jones, 261 B.R. 479, 483 (Bankr. N.D. Ala. 2001) (denying
a motion to reopen without a hearing). Further, § 350(b)
of the Bankruptcy Code, which governs the closing and
reopening of cases, makes no provision for hearings or
other procedures available to debtors. 11 U.S.C. § 350(b)
(2006). Even though Redmond is not entitled to a
hearing as a matter of law, the record is clear that he
was given ample opportunity to present his claims. The
bankruptcy judge held a hearing before denying each of
Redmond’s motions to reopen. After the district judge’s
remand order, the bankruptcy court held another
hearing (after three continuances) before issuing a thor-
ough opinion denying the motion. Given this procedural
history, Redmond’s argument that he was not given a
fair hearing is untenable. He had over four years and
three chances to persuade the bankruptcy judge to
reopen his case—and he failed.
8 No. 08-4288
A. Timeliness
The passage of time weighs heavily against reopen-
ing. The longer a party waits to file a motion to reopen
a closed bankruptcy case, the more compelling the
reason to reopen must be. In re Case, 937 F.2d 1014,
1018 (5th Cir. 1991) (citing Reid v. Richardson, 304 F.2d
351, 355 (4th Cir. 1962)). In assessing whether a motion
is timely, courts may consider the lack of diligence of
the party seeking to reopen and the prejudice to the
nonmoving party caused by the delay. In re Frontier
Enters., Inc., 70 B.R. 356, 359 (Bankr. C.D. Ill. 1987).
While the passage of time in itself does not con-
stitute prejudice to the opposing party, a delay may be
prejudicial when combined with other factors such as
court costs and attorney’s fees in state-court foreclosure
proceedings. Bianucci, 4 F.3d at 528-29. We held in
Bianucci that a two-year delay that caused the creditor
to incur costs in state-court foreclosure proceedings was
a sufficient basis to deny reopening. Id. In Bianucci the
debtor filed the motion to reopen two years after the
case had been closed and five months after he became
aware of the creditor’s lien on his property. Id. at 529.
As the bankruptcy court noted here, Redmond’s delay
“dwarfs” the two-year delay in Bianucci. Redmond re-
ceived the payoff letters at the root of this dispute in
1998, and he proceeded to litigate the matter for seven
years in state court. In 2005, three weeks before trial in
state court and four years after the case had been closed,
Redmond finally moved to reopen his bankruptcy case.
The timing of the motion strongly suggests that it was
No. 08-4288 9
a stalling tactic to delay the state-court foreclosure pro-
ceeding. By 2005 the judge who had presided over the
bankruptcy case had retired, and the records had been
archived. In the meantime Pinnacle had incurred costs
in the state-court proceeding—the exact ground for
prejudice in Bianucci.
Redmond argues that he could not have filed his
motion to reopen until 2005, when Pinnacle provided
him with a breakdown of the charges it was seeking in
its 1998 payoff letters. But he actively disputed the
charges as long ago as 1998, and nothing prevented
him from bringing the matter to the attention of the
bankruptcy court at that time. We have rejected the
notion that “anyone who has been a debtor in bank-
ruptcy has eternal access to federal court for all
disputes related in some way to the debts handled in
the bankruptcy proceeding.” Zurn, 290 F.3d at 864.
The bankruptcy court did not abuse its discretion in
rejecting the motion to reopen as untimely.
B. Facial Validity of Redmond’s Bankruptcy Claims
The motion’s lack of timeliness was one of three
reasons given by the bankruptcy judge for denying the
motion to reopen. The judge also held that Redmond’s
arguments had no substantive merit. Redmond con-
tended that Pinnacle’s actions in the state-court fore-
closure suit violated various bankruptcy-court orders.
The bankruptcy judge held that Pinnacle’s actions—
issuing payoff letters and initiating a foreclosure pro-
ceeding after Redmond had defaulted and the auto-
10 No. 08-4288
matic stay had been lifted—were not attempts to collect
in violation of the bankruptcy stay or other orders.
We agree.
As an initial matter, we cannot accept Redmond’s
contention that the bankruptcy court disregarded the
district court’s remand instructions. In the remand
order, the district judge took issue with the bankruptcy
court’s distinction between a lien placed on real, as op-
posed to personal, property because both types of liens
could violate the terms of a bankruptcy plan. The
district court directed the bankruptcy judge to “d[i]g
deeper,” take into account “all relevant factors,” and
make “all necessary inquiries” into whether Redmond
had cause to reopen his bankruptcy case. As a general
matter, the bankruptcy judge was free to base his
postremand ruling on factors relevant to but not specifi-
cally addressed in the remand order, see United States v.
Morris, 259 F.3d 894, 898 (7th Cir. 2001), and here
the district court expressly directed the bankruptcy
judge to do so.
And the bankruptcy judge did exactly what he was
instructed to do: He considered all relevant factors in
determining whether to reopen Redmond’s case. The
judge issued a lengthy opinion in which he analyzed in
detail whether Pinnacle had violated the automatic stay,
the Agreed Order, the Chapter 13 plan, or the discharge
injunction. Specifically, the bankruptcy court held that
Pinnacle had not sought to collect prepetition debt in
violation of the bankruptcy plan by issuing the payoff
letters. This is the exact issue Redmond claims the
judge failed to decide earlier.
No. 08-4288 11
Redmond also ignores the fact that when the case
returned to the district court after remand, the district
court affirmed the denial of reopening. We have held
that a district court is “clearly in the best position to
know the scope of its own remand order,” and its
affirmance of the bankruptcy court’s ruling indicates
that its concerns were adequately addressed. Ingersoll,
562 F.3d at 864. Tellingly, Redmond quotes at length
from the district court’s remand order, but disregards
the affirmance after remand.
As for Redmond’s specific allegations of error, we
agree with the district court that none have merit. He
argues that Pinnacle’s inclusion of certain prepetition
debts in the payoff letters violated (1) the automatic
stay, (2) the Agreed Order, (3) the Chapter 13 plan, and
(4) the bankruptcy discharge. We take each of these
arguments in turn, beginning with the automatic stay.
The bankruptcy court properly concluded that the
payoff letters did not violate the automatic-stay provi-
sion of § 362(a) of the Bankruptcy Code. 11 U.S.C. § 362(a).
Section 362(a) prohibits collection activities in violation
of the stay, such as attempting to convert an unsecured
prepetition claim into a secured claim, attempting to
obtain possession of property of the Chapter 13 estate, or
attempting to perfect a lien against property of the
estate. See Mann v. Chase Manhattan Mortg. Corp., 316
F.3d 1, 3-4 (1st Cir. 2003) (citing 11 U.S.C. § 362(a)).
Payoff letters, however, are not acts of collection
and therefore do not constitute violations of the auto-
matic stay. As the bankruptcy judge explained, the
payoff letters were “simply statements of the bank’s
12 No. 08-4288
position as to what was owed” issued in response to
Redmond’s demand. Banks furnish payoff letters at the
debtor’s request to help the debtor prepare to pay off a
loan. To hold that a payoff letter violates an automatic
stay would be preposterous; it would enable debtors to
draw banks into violations of bankruptcy law merely by
requesting a statement of what they owed.
Moreover, the language of Pinnacle’s payoff letters
confirms the finding that they were not attempts to
collect. The March 19, 1998 letter, for example, explains
that it is a “statement of the amount required to be paid
off on April 1, 1998” (the date the balloon payment
was due). The amounts given in the letter are “subject to
a final confirmation,” and the itemization of charges
clearly indicates the “Total Amount [is] Due on April 1,
1998.” 6
Redmond relies on In re Sullivan, 367 B.R. 54 (Bankr.
N.D.N.Y. 2007), but that case is distinguishable and
in any event contrary to the weight of authority.7
6
Redmond suggests that inaccurate payoff letters constitute
violations of the automatic stay. This argument is unavailing.
Section 362(a) makes no distinction between collection activ-
ities based on the accuracy of the amount claimed. 11 U.S.C.
§ 362(a).
7
Other courts have held that payoff letters are not attempts
at collection and do not violate automatic stays. See In re Saylor,
No. 3:07-cv-229-WKW, 2008 WL 2397344, at *5 (M.D. Ala.
June 9, 2008) (creditor had not “acted” for purposes of § 362(a)
by sending a “transaction history report” and payoff letter at
(continued...)
No. 08-4288 13
Unlike the present case, Sullivan involved additional
creditor conduct that clearly violated the automatic
stay. That is, the creditor in Sullivan did more than just
issue a payoff letter; it also prevented the sale of the
debtor’s property by withholding an abstract of title
until the debtor had paid the debt. Id. at 63-65. Further,
the automatic stay in Sullivan had not yet been lifted
and therefore the creditor’s subsequent collection activ-
ities violated an ongoing stay. By contrast, the automatic
stay in this case had terminated at the time the balloon
payment went unpaid, and therefore Pinnacle could
initiate the state-court foreclosure suit without violating it.8
7
(...continued)
debtor’s request (citing In re Redmond, 380 B.R. 179, 187 (Bankr.
N.D. Ill 2007))); Sullivan v. First Horizon Home Loan, No.
02-10657, 2003 Bankr. LEXIS 2091, at *2 (Bankr. E.D. Pa. Nov. 23,
2003) (“Neither the internal posting of fees to an account, nor
their inclusion on a payoff statement implicate the automatic
stay because neither is an act or effort to collect the fees.”). In a
related context, courts have held that merely recording an
amount owed in a creditor’s internal bookkeeping does not
violate the automatic stay. See Mann v. Chase Manhattan Mortg.
Corp., 316 F.3d 1, 3-4 (1st Cir. 2003) (holding that absent an
overt attempt to recover, the creditor’s internal bookkeeping
does not violate the automatic stay); In re Sims, 278 B.R. 457, 471
(Bankr. E.D. Tenn. 2002) (same). These holdings reinforce
the conclusion that payoff letters based on the amounts re-
flected in these records, when not accompanied by affirmative
steps to collect, do not violate the automatic stay.
8
The Sullivan court’s holding may also have been influenced
by the fact that the creditors conceded at an evidentiary
(continued...)
14 No. 08-4288
We also conclude that the bankruptcy judge did not
abuse his discretion in rejecting Redmond’s claim that
Pinnacle violated the Agreed Order. The bankruptcy
judge found that Pinnacle could not have violated the
Agreed Order because the order “did not require the
bank to do or refrain from doing anything that affected
Redmond.” The Agreed Order simply (1) reinstated the
automatic stay, (2) froze the first foreclosure pro-
ceeding, and (3) permitted Redmond to pay off his mort-
gage on or before the balloon payment date. Because
the payoff letters did not constitute collection activity in
violation of the stay, they cannot have violated the
Agreed Order either. Furthermore, the payoff letters
were issued at Redmond’s request and had no relation to
the frozen foreclosure proceedings. Finally, the payoff
letters in no way prevented Redmond from paying his
claim, so they were fully consistent with the Agreed
Order’s provision requiring Redmond to pay his
mortgage on or before the balloon payment date. When
Pinnacle ultimately filed its second foreclosure suit
in state court, Redmond had already defaulted for
a second time and the automatic stay had been lifted
pursuant to the terms of the Agreed Order. Therefore,
neither the payoff letters nor the foreclosure suit
could have violated the Agreed Order.
8
(...continued)
hearing that the payoff letter was a “request” for legal fees. In re
Sullivan, 367 B.R. 54, 62 (Bankr. N.D.N.Y. 2007). Pinnacle
did not make a similar concession.
No. 08-4288 15
Redmond does not appear to have a valid claim
that Pinnacle violated the Chapter 13 plan. He contends
that the payoff letters improperly included payments
that were to be made under the bankruptcy plan and that
in effect Pinnacle was seeking to collect that amount
twice—once from Redmond and a second time from
the Chapter 13 trustee. The payoff letters, however,
reflected Redmond’s outstanding debt without regard
to how that balance was to be paid. The inclusion of
unpaid plan amounts in the payoff letters was not an
attempt to collect those amounts twice because it was
not an attempt to collect in the first place. In addition,
the bankruptcy judge noted that if Redmond had paid
the plan amounts as part of his balloon payment, the
plan could have been modified to extinguish further
payments. It also makes sense that the payoff letters
would reflect the entire debt, including that owed under
the plan, because according to Redmond, he needed to
know the outstanding balance in order to refinance
the mortgage.
Redmond relies heavily on the holding in In re Barton
that collection of a debt in excess of the amount allowed
in a Chapter 13 plan may form a basis for bankruptcy
sanctions. 359 B.R. 681 (Bankr. N.D. Ill. 2006). Barton
is inapposite, however. It involved neither a motion to
reopen nor payoff letters solicited by the debtor;
instead, the creditor in that case refused to accept the
Chapter 13 trustee’s payments of real-estate taxes
under the confirmed plan and subsequently attempted
to collect those taxes plus interest outside of the bank-
ruptcy case. Id. at 683-84. Pinnacle, by contrast, did not
16 No. 08-4288
refuse to accept Redmond’s payments under the plan
and then turn around to collect the full debt, plus inter-
est, via a state-court foreclosure after the plan had been
discharged. Rather, Redmond defaulted by failing to pay
his mortgage under the plan, which resulted in the
lifting of the automatic stay. Once the stay was lifted,
Pinnacle proceeded against him in state court on the
default. Barton’s holding regarding bankruptcy sanctions
for debt collection outside of a bankruptcy plan there-
fore has no relevance to this case.
Finally, we agree with the bankruptcy judge’s conclu-
sion that Pinnacle did not violate the discharge injunc-
tion. The judge rejected this contention for two rea-
sons. First, Redmond’s debt to Pinnacle was never dis-
charged because he defaulted by failing to make the
balloon payment in accordance with the Agreed Order.
Second, as the bankruptcy judge explained, even if there
had been a discharge under § 524(a) of the Bankruptcy
Code, the discharge “could never have affected the
bank’s right to foreclose on its lien.” The judge noted that
a § 524(a) discharge only affects personal judgments
against the debtor, not in rem foreclosure proceedings.
Since the lien was neither avoided under another pro-
vision of the Code nor paid in full, Pinnacle was entitled
to recover its property in a foreclosure proceeding re-
gardless of whether the debt had been discharged
under the plan.
As the bankruptcy judge held, a closed bankrupty
proceeding should not be reopened “where it appears
that to do so would be futile and a waste of judicial re-
No. 08-4288 17
sources.” In re Carberry, 186 B.R. 401, 402 (Bankr. E.D. Va.
1995)); see Antonious, 373 B.R. at 406 (bankruptcy court
may deny motion to reopen where it is clear at the outset
the debtor would not be entitled to relief); Arleaux v.
Arleaux, 210 B.R. 148, 149 (B.A.P. 8th Cir. 1997) (motion
to reopen denied on ground that it would provide no
relief to the debtor). That was certainly the case here.
C. Availability of State-Court Forum
As if more were needed, the bankruptcy judge
properly held that the state-court forum was appro-
priate to litigate Redmond’s potential claims. The
amount needed to cure a mortgage default is a question
of state law; § 1322(e) of the Bankruptcy Code expressly
provides that the amount necessary to cure a default is
determined “in accordance with the underlying
agreement and applicable nonbankruptcy law.” 11 U.S.C.
§ 1322(e). The state court could therefore adequately
entertain Redmond’s challenges to the amounts
Pinnacle was claiming.
Redmond argues that he could not bring his claims
in state court because bankruptcy courts have exclusive
jurisdiction over sanctions under § 362(h) of the Bank-
ruptcy Code. Id. § 362(h). This argument is meritless.
For the reasons we have explained, Redmond has no
basis for sanctions under bankruptcy law.
A FFIRMED.
10-20-10