In re: Duane L. Bentley

By order of the Bankruptcy Appellate Panel, the precedential effect
of this decision is limited to the case and parties pursuant to
6th Cir. BAP LBR 8024-1(b). See also 6th Cir. BAP LBR 8014-1(c).

File Name: 20b0006n.06

BANKRUPTCY APPELLATE PANEL
OF THE SIXTH CIRCUIT

IN RE: DUANE L. BENTLEY, ┐
Debtor. │
│
___________________________________________
│
DUANE L. BENTLEY, > No. 19-8026
Appellant, │
│
│
v. │
│
ONEMAIN FINANCIAL GROUP, LLC, │
│
Appellee.
│
┘

Appeal from the United States Bankruptcy Court
for the Eastern District of Kentucky at Covington.
No. 2:18-bk-20281—Tracey N. Wise, Judge.

Decided and Filed: July 8, 2020

Before: BUCHANAN, CROOM, and PRICE SMITH, Bankruptcy Appellate Panel Judges.

_________________

COUNSEL

ON BRIEF: Robert R. Sparks, STRAUSS TROY CO., LPA, Cincinnati, Ohio, John M. Simms,
ATKINSON SIMMS & KERMODE, PLLC, Lexington, Kentucky, for Appellant. Douglas M.
Foley, Stephanie J. Bentley, MCGUIREWOODS LLP, Washington, D.C., Adam R. Kegley,
FROST BROWN TODD LLC, Lexington, Kentucky, for Appellee.
 No. 19-8026 In re Bentley Page 2

_________________

OPINION
_________________

JIMMY L. CROOM, Bankruptcy Appellate Panel Judge. The Debtor in this case, Duane
L. Bentley (“Debtor”), asserts that the bankruptcy court erred in concluding that OneMain
Financial Group, LLC (“Creditor”), did not violate the 11 U.S.C. § 524(a)(2) discharge
injunction when it refused to release its lien on a vehicle that Debtor surrendered during his
chapter 7 case. Specifically, Debtor argues that Creditor violated the discharge injunction by
refusing to release its lien when asked to do so by Debtor and by conditioning release of the lien
on payment of an undetermined amount. Debtor argues that Creditor’s actions were objectively
coercive and sanctionable under the standard set forth by the First Circuit Court of Appeals in
Pratt v. GMAC (In re Pratt), 462 F.3d 14 (1st Cir. 2006). Debtor also argues that Creditor’s
actions were sanctionable under Taggart v. Lorenzen, 139 S. Ct. 1795 (2019).

ISSUES ON APPEAL

Debtor argues that the Bankruptcy Court erred in granting Creditor summary judgment
and concluding that Creditor did not violate the discharge injunction when it failed to release its
lien on Debtor’s vehicle after it decided not to repossess the vehicle and thereafter attempted to
coerce Debtor into paying for a lien release.

JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this
appeal. The United States District Court for the Eastern District of Kentucky has authorized
appeals to the Panel and no party has timely elected to have this appeal heard by the district
court. 28 U.S.C. § 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as
of right pursuant to 28 U.S.C. § 158(a)(1). “Orders in bankruptcy cases qualify as ‘final’ when
they definitively dispose of discrete disputes within the overarching bankruptcy case.” Ritzen
Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 586 (2020) (citing Bullard v. Blue Hills
Bank, 575 U.S. 496, 501, 135 S. Ct. 1686 (2015)). An order granting summary judgment to one
party and denying it to another is a final order for purposes of appeal. Walls v. Amerisure Mut.
 No. 19-8026 In re Bentley Page 3

Ins. Co., 343 F.3d 881, 884 (6th Cir. 2003) (quoting Hamad v. Woodcrest Condo. Ass’n,
328 F.3d 224, 235 (6th Cir.2003)); Rogan v. Fifth Third Mortg. Co. (In re Rowe), 452 B.R. 591,
593 (B.A.P. 6th Cir. 2011) (citation omitted). The bankruptcy court’s denial of a debtor’s
motion for contempt for violation of the discharge injunction is also a final, appealable order.
In re Glaspie, 410 B.R. 261, 266 (E.D. Mich. 2007).

“An order granting summary judgment is reviewed de novo.” Church Joint Venture, L.P.
v. Blasingame (In re Blasingame), 597 B.R. 614, 616 (B.A.P. 6th Cir. 2019) (citation omitted).
An order denying summary judgment “on purely legal grounds” is also reviewed de novo.
Tennessee ex rel. Wireless Income Props., LLC v. City of Chattanooga, 403 F.3d 392, 395-96
(6th Cir. 2005) (citing Walls, 343 F.3d at 884). “Under a de novo standard of review, the
reviewing court decides an issue independently of, and without deference to, the trial court’s
determination.” Menninger v. Accredited Home Lenders (In re Morgeson), 371 B.R. 798, 800
(B.A.P. 6th Cir. 2007) (citation omitted).

The court’s interpretation of 11 U.S.C. § 524 is reviewed de novo. Ford Motor Credit
Co. v. Morton (In re Morton), 410 B.R. 556, 559 (B.A.P. 6th Cir. 2009) (citation omitted). The
bankruptcy court’s determination that the creditor did not violate the discharge injunction
presents a mixed question of law and fact. Id. (citing WesBanco Bank Barnesville v. Rafoth
(In re Baker & Getty Fin. Servs., Inc.), 106 F.3d 1255, 1259 (6th Cir. 1997)). Accordingly, “the
court’s conclusions of law are reviewed de novo” and its “findings of fact are reviewed under the
clearly erroneous standard.” Id. (citations omitted). “[A] finding is ‘clearly erroneous’ when
although there is evidence to support it, the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed.” Anderson v. City of Bessemer
City, N.C., 470 U.S. 564, 573, 105 S. Ct. 1504 (1985) (quoting United States v. U.S. Gypsum
Co., 333 U.S. 364, 395, 68 S. Ct. 525 (1948)).
 No. 19-8026 In re Bentley Page 4

FACTS

Debtor does not dispute any of the bankruptcy court’s factual findings. As such, the
factual findings are reproduced here, verbatim (footnotes in original):

The parties agree on the material facts. In June 2017, Debtor obtained a
loan from Creditor and granted Creditor a lien on a 2001 Dodge Dakota
(the “Vehicle”). Debtor filed a chapter 7 petition on March 5, 2018, and Creditor
received notice of the bankruptcy filing. Debtor’s Schedule D, filed with his
petition, stated that Creditor had an $8,000 claim secured by the Vehicle, which
Debtor valued at $150. Debtor also filed a statement of his intention to surrender
the Vehicle to Creditor with his petition. Debtor did not reaffirm the debt to
Creditor before entry of his discharge on June 11, 2018. Creditor’s lien was not
avoided or eliminated in the bankruptcy, and Creditor received notice of entry of
the discharge. Debtor never paid the balance of Creditor’s claim. Creditor
never repossessed the Vehicle, which was stored on property owned by Debtor’s
ex-father-in-law, Paul Reis.

On June 29, 2018, Debtor called Creditor1 and stated that he had received
his discharge, wanted “to take the lien off the title of the vehicle that was in
bankruptcy that you guys have the lien on,” and advised that the Vehicle “is old.
It’s trash. It’s totaled.” [ECF No. 78-1 at 6.] Creditor’s representative told
Debtor: “once there’s a discharge you are not responsible for the balance of the
loan, but creditors are allowed to keep an interest in the lien on the vehicle and
they’ll ask for some kind of offer to be made for a lien release.” [Id.] Creditor’s
representative then said that it sounded as though “this is just a salvage car. It’s
junk value probably,” and told Debtor to have a local salvage yard call Creditor to
provide a “scrap value offer maybe so much on the pound” at which point
Creditor would “consider accepting that to release the lien. They will sell it for
some minimal consideration and get the lien released.” [Id. at 7.]

Several weeks later, on August 1, 2018, Mr. Reis and Debtor called
Creditor. Near the start of the call, Creditor’s representative advised Debtor:
“If your personal liability to this debt has been discharged in bankruptcy, any
payments you make on this account are voluntary[.] [A]lthough you may not be
legally obligated to repay this debt, [a lien] on or against collateral securing the
account may have survived the discharge[]. If such a lien exists, [Creditor] may
enforce any applicable state release [sic] to recover such collateral.” [ECF No.
78-1 at 11.] The representative, speaking with Mr. Reis (at Debtor’s request and

1Transcribed versions of this call and other calls involving Debtor and Creditor are in the record. Debtor
affirmed at his deposition that the call transcripts accurately reflected the conversations he and Mr. Reis had with
Creditor. Mr. Reis agreed that the transcripts were accurate.
No. 19-8026 In re Bentley Page 5

with his permission), advised that Creditor would not repossess the Vehicle
because “[t]he value is too low,” and then said:

So the options that we can give now are working with a salvage
yard, an individual or the customer himself. If it’s a customer or a
third party wanting to make an offer on it against the lien, then we
would require a mechanic’s estimate to come along with that offer.
If it’s a really low offer just to support the value that you’re saying
the vehicle is worth. If it’s a junk vehicle and doesn’t run and
you’re wanting to just scrap it, you can contact the local salvage
yard to see if they are interested in working with us. You would
explain to them that we are the lienholders and they would call and
make an offer on the lien and then once that is approved by
management and we could work with them to get payment and
release that lien to the salvage yard.
[Id. at 12.] Mr. Reis responded that he would have the Vehicle towed to the
highway or to one of Creditor’s locations. Creditor’s representative then stated
that Debtor still owned the Vehicle, that Creditor only had a lien on it, and that
Debtor would be charged any fees associated with abandoning the Vehicle: “You
can do whatever you want with the vehicle, that’s up to him and you whatever
you want to do with the vehicle itself. We just can’t release the lien without some
kind of satisfaction on that lien.” [Id. at 15.]
Mr. Reis and Creditor’s representative then discussed the options
presented to Debtor. Mr. Reis stated that his “neighbor down the road has a
junkyard” and “offered me $100 for it. . . .” [Id. at 15.] Mr. Reis and the
representative also discussed whether Mr. Reis would buy the Vehicle himself for
$100. Creditor’s representative stated that Mr. Reis could submit an offer along
with “a mechanic’s estimate written up on a mechanic’s shop’s letterhead saying
what’s wrong with the vehicle and how much it costs to repair that,” which
Creditor would consider in deciding whether to accept his offer. [Id. at 12.]
Although Mr. Reis first stated he did not intend “to go through a lot of hassle
getting a mechanic to write it up,” he later said that he knew a mechanic who
could provide a written statement. [Id. at 12, 15.] By the end of the call, Mr. Reis
suggested that he would send via email or fax a $100 offer to Creditor with
pictures of the Vehicle (that would show damage to the vehicle, high odometer
mileage, or otherwise provide information to support his offer), and also that if a
mechanic’s estimate ultimately was needed he could provide that from a local
mechanic as well.
However, Mr. Reis did not send in an offer. Instead, on October 19, 2018,
Mr. Reis again called Creditor and stated that a local salvage yard owner was
willing to remove the car from Mr. Reis’s property, pay $100 for it, and waive the
tow fee.2 Creditor’s representative stated: “It would probably be best if the guy
2Debtor was present during the call but did not participate.
 No. 19-8026 In re Bentley Page 6

from the salvage yard would contact us and let us know he’s picked it up and
make us an offer for $100 to release it.” [ECF No. 78-1 at 21.] Mr. Reis then
stated: “I just want to get rid of it, but I’ll give him your number.” [Id.]

But, again, this did not occur. Instead, on November 21, 2018, Debtor
moved to reopen his bankruptcy case to pursue Creditor for an alleged violation
of the discharge injunction, which motion was granted. Then, on December 18,
2018, Debtor filed his Motion for Contempt against Creditor, in which Debtor
alleged that Creditor violated “the discharge injunction under Section
524(a)(2) . . . by collecting and attempting to collect discharged debts by refusing
to release its lien on his valueless motor vehicle until [Debtor] paid the full
balance due on its [sic] prepetition debt.” [ECF No. 16 ¶ 11.] Debtor sought to
pursue relief for the discharge violation on his own behalf and on behalf of a class
of allegedly similarly-situated debtors.
Ten days after Debtor filed the Motion for Contempt, Creditor released its
lien on the Vehicle.

In re Bentley, 607 B.R. 889, 891-93 (Bankr. E.D. Ky. 2019).

Following the filing of Debtor’s motion for contempt, the parties filed competing motions
for summary judgment. The bankruptcy court conducted a hearing on the motions on September
10, 2019.

The court issued a memorandum opinion and order on October 2, 2019 (“Opinion”),
granting Creditor’s motion for summary judgment and denying Debtor’s motion for summary
judgment and motion for contempt.

The bankruptcy court began its analysis by setting forth the standard for summary
judgment and noting that it “does not change when each side seeks a summary judgment in their
favor.” Id. at 893 (citing Taft Broad. Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991)).
Accordingly, “ ‘[t]he court must evaluate each party’s motion on its own merits, taking care in
each instance to draw all reasonable inferences against the party whose motion is under
consideration.’ ” Id. (quoting Taft Broad. Co., 929 F.2d at 248).

The court then turned its attention to the 11 U.S.C. § 524(a) discharge injunction. The
court set forth the statutory language of § 542(a)(2) and stated that “[a] creditor that violates the
discharge injunction may be found in contempt of court” and may be sanctioned pursuant to
11 U.S.C. § 105(a). Id. at 894 (citing Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 421-23
 No. 19-8026 In re Bentley Page 7

(6th Cir. 2000)). The bankruptcy court noted that a debtor alleging a violation of the § 524
discharge injunction bears the burden of proof and must satisfy that burden with clear and
convincing evidence. The court also noted that under Taggart, “a creditor may be found in
contempt ‘when there is no objectively reasonable basis for concluding that the creditor’s
conduct might be lawful under the discharge order.’ ” Id. (quoting Taggart v. Lorenzen,
139 S. Ct. 1795, 1801 (2019)).

The bankruptcy court examined the particular facts in Debtor’s case and determined that
Creditor had not violated § 524(a)(2). In so doing, the court examined the case Debtor
extensively relied upon, Pratt v. GMAC (In re Pratt), 462 F.3d 14 (1st Cir. 2006). Bentley,
607 B.R. at 894. The bankruptcy court began by recognizing that Pratt is “an out-of-circuit
decision[.]” Id. The bankruptcy court explained Pratt’s holding as follows: “In assessing
violations of the automatic stay and the discharge injunction, the core issue is whether the
creditor acted in such a way as to ‘coerce’ or ‘harass’ the debtor improperly.” Bentley, 607 B.R.
at 895 (internal punctuation omitted) (quoting Pratt, 462 F.3d at 19). The bankruptcy court
recognized that such an analysis is a fact-specific inquiry and requires a court to determine
whether the exercise of a creditor’s in rem rights under state law hampers a debtor’s right to a
fresh start.

The bankruptcy court distinguished the facts in this case from the creditor’s actions in
Pratt. In Pratt, the creditor conditioned release of its lien on the debtors’ payment of the full
balance of the claim, whereas, in the case before the bankruptcy court, Creditor had agreed to
release its lien on Debtor’s vehicle for “some minimal consideration.” Id. at 897. The
bankruptcy court concluded this was an important difference.

The bankruptcy court also examined Canning v. Beneficial Me., Inc. (In re Canning),
706 F.3d 64 (1st Cir. 2013). Although Canning involved real property, the bankruptcy court
found “the First Circuit’s guidance in Canning . . . apropos,” noting that

[t]the First Circuit rejected the Cannings’ reading of Pratt that “we would have to
find a discharge injunction violation every time a secured creditor opposes a
debtor’s ‘foreclose or release’ demand based on the business determination that
repossession is not cost effective,” because “Pratt sought to strike a balance
 No. 19-8026 In re Bentley Page 8

between the competing state-law rights of secured creditors and the bankruptcy
rights of debtors[.]”

Bentley, 607 B.R. at 896 (quoting Canning, 706 F.3d at 72). The bankruptcy court rejected
Debtor’s “argument about the distinction between Pratt and Canning – that Pratt stands as the
law for ‘old vehicles’ (repossess or release) and Canning applies to real estate[.]” Id. at 897.
The bankruptcy court held that “[t]he difference in the two cases is in the facts, not that different
law applies to surrender and in rem remedies depending on the type of collateral involved.” Id.
The court stated that it “generally agree[d] with the First Circuit’s statements in both Pratt and
Canning that whether coercive behavior occurred is dependent on the facts of each case.” Id.

In concluding that Creditor did not violate the discharge injunction, the bankruptcy court
relied heavily on the fact that Creditor “did not even demand $150 from Debtor in exchange for a
lien release; in fact, Creditor did not ask Debtor to pay any funds to Creditor at all, let alone pay
any specific amount.” Id. Instead, Creditor offered Debtor several different methods of
obtaining release of Creditor’s in rem rights in the vehicle. The court concluded that
“[n]o evidence supports Debtor’s position that the options Creditor presented to accomplish a
lien release were a subterfuge to coerce payment of the discharged debt.” Id. The court also
noted that Debtor could have secured the lien release by filing a motion to redeem the Vehicle
under § 722 “and offer[ing] a nominal amount to bring Creditor’s ‘demands’ to a conclusion.”
Id.

Because the bankruptcy court determined that Creditor’s actions were not objectively
coercive and did not violate the § 524 discharge injunction, the court concluded that it was
unnecessary to determine whether Creditor should be sanctioned under the standard set forth in
Taggart, 139 S. Ct. at 1801.3

Debtor filed his timely appeal on October 14, 2019.

3In denying the motion for contempt, the bankruptcy court also denied Debtor’s request to certify the
matter as a class action proceeding pursuant to Federal Rule of Bankruptcy Procedure 7023 and Federal Rule of
Civil Procedure 23. Debtor does not challenge that portion of the court’s ruling.
 No. 19-8026 In re Bentley Page 9

DISCUSSION

I. SUMMARY JUDGMENT

Federal Rule of Civil Procedure 56, made applicable to bankruptcy proceedings by
Federal Rules of Bankruptcy Procedure 7056 and 9014, provides that summary judgment is
appropriate “if the movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “Where the record
taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is
no genuine issue for trial.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S.
574, 587, 106 S. Ct. 1348 (1986) (internal quotation marks and citation omitted). The party
moving for summary judgment has the initial “burden of proving that no genuine issue as to any
material fact exists and that it is entitled to a judgment as a matter of law.” R.S.W.W., Inc. v. City
of Keego Harbor, 397 F.3d 427, 433 (6th Cir. 2005) (citation omitted). The burden then shifts to
the nonmoving party to “come forward with ‘specific facts showing that there is a genuine issue
for trial.’ ” Matsushita Elec. Indus. Co., 475 U.S. at 587 (citing Fed. R. Civ. P. 56(e)). When
faced with competing motions for summary judgment, a court “must evaluate each motion on its
own merits and view all facts and inferences in the light most favorable to the nonmoving party.”
Wiley v. United States, 20 F.3d 222, 224 (6th Cir. 1994) (citing Taft Broad. Co. v. United States,
929 F.2d 240, 248 (6th Cir. 1991)).

II. 11 U.S.C. § 524(a)(2)

Section 524(a)(2) of the Bankruptcy Code provides that a discharge “operates as an
injunction against the commencement or continuation of an action, the employment of process,
or an act, to collect, recover or offset any . . . debt [discharged under section 727 . . . of this title]
as a personal liability of the debtor, whether or not discharge of such debt is waived[.]”
11 U.S.C. § 524(a)(2).4 “The purpose of § 524(a) is to afford a debtor a ‘fresh start’ by ensuring
that a debtor will not be pressured in any way to repay a debt after it has been discharged.”
Paglia v. Sky Bank (In re Paglia), 302 B.R. 162, 166 (Bankr. W.D. Pa. 2003) (citation omitted);

4Unless otherwise indicated, all citations are to title 11 of the United States Code.
 No. 19-8026 In re Bentley Page 10

see also Isaacs v. DBI-ASG Coinvester Fund, III, LLC (In re Isaacs), 895 F.3d 904, 910 (6th Cir.
2018).

As the language of § 524(a)(2) makes clear, the discharge injunction prohibits creditors
from attempting to collect a discharged debt “as a personal liability of the debtor.”
11 U.S.C. § 542(a)(2); see also Tenn. Student Assistance Corp. v. Hood, 541 U.S. 440, 447, 124
S. Ct. 1905 (2004). It does not, however, affect a creditor’s in rem rights in the collateral. In
Johnson v. Home State Bank, the Supreme Court held that “a bankruptcy discharge extinguishes
only one mode of enforcing a claim—namely, an action against the debtor in personam—while
leaving intact another—namely, an action against the debtor in rem.” 501 U.S. 78, 84, 111 S. Ct.
2150 (1991).

The concept that a lien “rides through” bankruptcy is axiomatic. The Supreme Court
recognized the principle as early as 1886 in Long v. Bullard, 117 U.S. 617, 621, 6 S. Ct. 917
(1886). “If a creditor had a lien to secure payment of a pre-petition debt before the Chapter 7
bankruptcy, that lien survives, or ‘rides through’ the Chapter 7 bankruptcy and bankruptcy
discharge, unless the lien is avoided in the bankruptcy case.” In re Kalabat, 592 B.R. 134, 143
(Bankr. E.D. Mich. 2018). “As a general proposition, where liens have ‘passed through
bankruptcy unaffected’, a creditor may exercise valid lien rights postdischarge without violating
the discharge injunction.” Botson v. Citizens Banking Co. (In re Botson), 531 B.R. 719, 726
(Bankr. N.D. Ohio 2015).

Although there is no private right of action under § 524, courts enforce the discharge
injunction through their civil contempt power and, in appropriate circumstances, the imposition
of sanctions. Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 421 (6th Cir. 2000). Pursuant to
the Supreme Court’s decision in Taggart v. Lorenzen, “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.” 139 S. Ct. 1795, 1799 (2019). However, before sanctions
may be considered, the debtor must first demonstrate that the creditor committed a violation of
the discharge injunction by clear and convincing evidence. In re Jackson, 554 B.R. 156, 164-65
(B.A.P. 6th Cir. 2016), aff’d, No. 16-4021, 2017 WL 8160941 (6th Cir. Oct. 18, 2017). An
otherwise valid exercise of a creditor’s in rem rights may violate the discharge injunction “if the
 No. 19-8026 In re Bentley Page 11

debtor proves the creditor acted in such a way as to coerce or harass the debtor improperly, i.e.,
so as to obtain payment of the discharged debt.” Paul v. Iglehart (In re Paul), 534 F.3d 1303,
1308 (10th Cir. 2008) (internal quotation marks omitted) (citing Pratt v. GMAC (In re Pratt),
462 F.3d 14, 19 (1st Cir. 2006)); see also In re Borowski, 216 B.R. 922, 924 (Bankr. E.D. Mich.
1998).

Relying on the First Circuit’s decision in Pratt, 462 F.3d 14, Debtor argues that
Creditor’s failure to release its lien on the Vehicle was objectively coercive and constituted a
sanctionable violation of the discharge injunction.5 In Pratt, at the time of conversion from
chapter 13 to chapter 7, the debtors owed approximately $2,600.00 on their vehicle. Id. at 16.
The debtors filed a notice indicating they intended to surrender the vehicle to GMAC. After
concluding that costs of repossession outweighed the vehicle’s value, GMAC decided to leave
the car in the debtors’ possession and wrote off the remaining balance of its claim.

Following the chapter 7 discharge, the car became inoperable and the Pratts had it towed
to a salvage yard; however, pursuant to state law, the salvage yard would not accept the car until
GMAC’s lien was released. For several months, the Pratts attempted to force GMAC to either
repossess the vehicle or release its lien. GMAC would not repossess the car and refused to
release its lien until the Pratts paid the total amount of the discharged debt.

The debtors in Pratt reopened their bankruptcy case and filed a contempt action against
GMAC. The debtors alleged that GMAC violated the discharge injunction by refusing to either
(1) repossess the surrendered vehicle or (2) release the lien without full payment of the
discharged loan balance. The bankruptcy court ruled that GMAC was simply enforcing its in
rem rights under state law and did not violate the discharge injunction. The district court agreed.

On appeal, the First Circuit reversed and concluded that GMAC had objectively coerced
the Pratts into repaying the discharged debt as a personal liability. Id. at 19. The First Circuit
recognized that a creditor’s in rem rights in collateral typically survive a bankruptcy discharge
and may be enforced according to state law. The First Circuit then considered § 521(a)(2) which
discusses a debtor’s ability to surrender collateral along with the other alternatives of redemption

5See note 6, infra.
 No. 19-8026 In re Bentley Page 12

and reaffirmation. The First Circuit recognized that the Bankruptcy Code does not define the
term “surrender.” However, because “Congress did not use the term ‘deliver,’ ” the First Circuit
concluded that “the most sensible connotation of ‘surrender’ in the present context is that the
debtor agreed to make the collateral available to the secured creditor[.]” Id. at 18-19. The First
Circuit also determined that “nothing in subsection 521(a)(2) remotely suggests that the secured
creditor is required to accept possession of the vehicle[.]” Id. at 19. Accordingly, the court
determined that the debtors’ surrender of the vehicle did not require GMAC to “repossess the
vehicle if GMAC deemed such repossession cost ineffective.” Id.

The First Circuit then turned to the question of whether a debtor’s stated intention to
surrender requires the creditor to release its lien. In addressing this issue, the court recognized
that “the core issue is whether the creditor acted in such a way as to ‘coerce’ or ‘harass’ the
debtor improperly.” Id. (citation omitted). The court noted that “the line between forceful
negotiation and improper coercion is not always easy to delineate, and each case must therefore
be assessed in the context of its particular facts.” Id. (emphasis added) (citation omitted).

The First Circuit stated that there were five facts “material” to the “assessment of
objective coercion” in the Pratts’ case: (1) the debtors timely filed their § 521(a)(2) notice of
intent to surrender; (2) the debtors made the vehicle available to GMAC; (3) the value and the
condition of the vehicle made it necessary to tow it a salvage dealer who would not accept it
without a lien release; (4) GMAC determined it was not cost effective to repossess the vehicle;
and (5) state law would not allow the vehicle to be junked without a release of GMAC’s lien. Id.
Although “GMAC did not create all these circumstances” and there was “no record evidence that
GMAC acted in bad faith,” the First Circuit concluded that GMAC’s actions were “objectively
coercive.” Id. The First Circuit held that GMAC’s right to refuse to release its lien until the loan
balance was paid in full under state law was outweighed by the strong federal interest in ensuring
“that debtors receive a ‘fresh start’ and are not unfairly coerced into repaying discharged
prepetition debts.” Id. (internal quotation marks and citations omitted). The court noted that
“even legitimate state-law rights exercised in a coercive manner might impinge upon the
important federal interest served by the discharge injunction[.]” Id.
 No. 19-8026 In re Bentley Page 13

In summarizing its decision, the First Circuit stated that “the particular confluence of the
above-mentioned circumstances renders the GMAC refusal to release its lien objectively
coercive.” Id. In so doing, the court highlighted two important facts. “First, GMAC announced
that it did not intend to repossess the ‘surrendered’ vehicle because it was of insufficient value,
then expressly conditioned its release of the lien upon the Pratts’ agreement to repay the loan
balance in full.” Id. at 19–20. Second,

as the Pratts could not junk the vehicle without a release of the GMAC
lien, . . . they were confronted with the grim prospect of retaining indefinite
possession of a worthless vehicle unless they paid the GMAC loan balance,
together with all the attendant costs of possessing, maintaining, insuring, and/or
garaging the vehicle.

Id. at 20. Thus, the First Circuit concluded that “the GMAC refusal had the practical effect of
eliminating the Pratts’ ‘surrender’ option under § 521(a)(2)” and coercing them into reaffirming
the debt. Id.

In making this decision, the First Circuit cautioned that the inquiry was fact specific.
“We do not suggest that a secured creditor invariably would be in violation of the discharge
injunction were it to insist upon its in rem rights under state law.” Id. If a creditor can provide
justification for its actions that is not outweighed by the strong federal interest in providing
debtors a fresh start, the First Circuit noted that the outcome might be different. Id.

The First Circuit revisited the Pratt decision in 2013 in Canning v. Beneficial Me., Inc.
(In re Canning), 706 F.3d 64 (1st Cir. 2013). In that case, the Cannings filed chapter 7 and
indicated their intent to surrender their residence to the mortgage holder, Beneficial Maine, Inc.
(“Beneficial”). At the time of filing, the property was valued at $130,000.00 and the outstanding
mortgage was $186,521.00. Beneficial did not foreclose on the property during the case nor did
it release its lien.

Approximately two months after the Cannings received their chapter 7 discharge,
Beneficial started sending correspondence to the debtors. The first letter informed the Cannings
that Beneficial was not going to foreclose on the property and that the debtors would still be
responsible for insurance, taxes, and maintenance on the home. The Cannings responded by
demanding Beneficial either immediately foreclose or release its lien. Beneficial refused to do
 No. 19-8026 In re Bentley Page 14

either and stated that it would not release the lien until either the mortgage balance was paid in
full or the parties could agree to some sort of compromise, such as a settlement offer or a short
sale. In each of its letters, Beneficial informed the Cannings that they were not personally liable
for the mortgage balance because their account had been charged off.

Eventually, the Cannings informed Beneficial that they had moved out of the house,
turned off the utilities, and instructed the relevant authorities that Beneficial was responsible for
the residence. The Cannings then reopened their chapter 7 case and filed a contempt proceeding
against Beneficial for violation of the § 524(a)(2) discharge injunction. In so doing, the
Cannings relied exclusively on Pratt and argued that Beneficial “acted in an objectively coercive
manner” in their case. Id. at 68. Beneficial disagreed and argued that the facts in the Cannings’
case were markedly different from those in Pratt. The bankruptcy court ruled in favor of
Beneficial and the Bankruptcy Appellate Panel affirmed.

On appeal, the First Circuit affirmed, explaining Pratt as follows:

In reversing the bankruptcy court’s judgment for the secured creditor, we zeroed
in on the following facts: (1) the secured creditor refused to repossess the car, but
conditioned release of its lien upon full payment of the loan balance; (2) the
debtors could not dispose of the car while encumbered and thus would have to
keep it indefinitely (together with the accompanying costs) unless they “paid in
full”; and (3) there were no reasonable prospects that the car would generate sale
proceeds for the secured creditor to attach, as it was essentially worthless with
limited possibilities of appreciation over time.
...
[W]e held that the secured creditor’s posture in exclusively conditioning release
of its lien on full payment of the loan balance amounted to a reaffirmation of debt
demand that contravened “the stringent ‘anti-coercion’ requirements of [the]
Bankruptcy Code[.]” Similarly, we noted that the secured creditor’s refusal to
release its lien “had the practical effect of eliminating the [debtors’] ‘surrender’
option under § 521(a)(2).”

Id. at 70 (emphasis added) (citing Pratt, 462 F.3d at 20).
 No. 19-8026 In re Bentley Page 15

Turning to the Cannings’ case, the First Circuit determined that it was factually
distinguishable from Pratt.

Absent from this case is the exclusive “pay in full” conditional release presented
in Pratt. Rather, in this case, Beneficial offered to release its lien through either a
settlement offer or a short sale. This not only indicates the intent to collect no
more than the value secured by the underlying lien, as the bankruptcy court
observed, but also denotes a willingness to negotiate a palatable solution for all
involved.

Id. at 71. The First Circuit also recognized that Beneficial had offered alternatives to the
Cannings and the Cannings failed to demonstrate why these alternatives were “unfeasible.” Id.
The court noted that the Cannings failed to present evidence of “other indicia of coercion, such
as, for example, Beneficial’s refusal to negotiate with the Cannings a compromise different to the
one originally proposed.” Id.

In their appeal to the First Circuit, the Cannings downplayed the factual differences with
Pratt and asserted that Beneficial had determined that foreclosure would not be cost effective
because the property’s value had decreased. The Cannings argued that this decision jeopardized
their fresh start “which is what the First Circuit in Pratt specifically prohibited a creditor from
doing.” Id. at 72. The First Circuit found the Cannings’ “reading of Pratt …overly broad” and
reasoned that

[u]nder the Cannings’ reading, we would have to find a discharge injunction
violation every time a secured creditor opposes a debtor’s “foreclose or release”
demand based on the business determination that repossession is not cost
effective. But …. Pratt unequivocally held that the applicable inquiry revolves
around the particular facts of each case, with the value of the underlying
collateral being only one of several factors to be considered.

Id. (emphasis added).

In cautioning that nothing in its opinion should be “relied upon to leverage a way out of
the bargaining table,” the First Circuit recognized the great benefits negotiation and compromise
play in relationships between secured creditors and discharged debtors. Id. at 73. The court
emphasized that “our remarks in Pratt still control: ‘the line between forceful negotiation and
 No. 19-8026 In re Bentley Page 16

improper coercion is not always easy to delineate, and each case must therefore be assessed in
the context of its particular facts.’ ” Id. (quoting Pratt, 462 F.3d at 19).

III. CASE ON APPEAL

In the case on appeal, Debtor does not dispute that the bankruptcy court set forth the
proper summary judgment standard. He also does not dispute any of the bankruptcy court’s
factual findings. Rather, he asserts that the bankruptcy court erred in finding that Creditor was
not objectively coercive and did not violate the discharge injunction. He argues that this error
was based on the court’s incorrect interpretation of applicable law and that Pratt mandates a
determination that Creditor violated the discharge injunction.6 In advancing this argument,
Debtor makes several critical errors. He distorts the factual differences between his case and
those in Pratt and misconstrues the First Circuit’s holding. He further downplays the relevance
of the First Circuit’s subsequent decision in Canning. Lastly, he improperly argues that the
bankruptcy court should have analyzed the case under Taggart v. Lorenzen.

The Panel rejects Debtor’s argument that the “facts in Pratt are similar, if not identical, to
the facts” in this case. (Appellant’s Br. at 15.) Although many of the facts in the two cases are
similar, the most important ones are not. First, the vehicle in Pratt was “worthless” and there
was no indication anyone was willing to purchase the vehicle. In the case on appeal, Debtor
valued the Vehicle at $150.00 on his bankruptcy schedules and the undisputed facts make clear
that both Mr. Reis and at least one, if not two, salvage yards were willing to pay $100.00 for it.
Thus, the Vehicle had some economic value. Second, the creditor in Pratt refused to release the
lien unless and until the debtors paid the full amount discharged in the chapter 7 case. In the case
on appeal, Creditor never requested any specific amount of money from Debtor, let alone the full
amount of the discharged loan. Creditor simply responded to offers proposed by Debtor and Mr.
Reis. Creditor stated that Mr. Reis or an interested third party could make an offer for the
Vehicle and present evidence of the Vehicle’s value to Creditor. Creditor would then consider

6Pratt is not controlling law in the Sixth Circuit; however, nothing in its reasoning would lead to a
conclusion that Creditor violated the discharge injunction in this case. Although the Panel concludes that the
bankruptcy court did not err by following the logic and reasoning in Pratt, the Panel does not conclude that Pratt is
the only approach to addressing violations of the § 524(a) discharge injunction.
 No. 19-8026 In re Bentley Page 17

whether to release the lien to the purchaser in exchange for payment of that amount. Creditor
was merely attempting to ensure that if anyone was going to purchase the vehicle, Creditor
would receive the value of its in rem lien.

Debtor’s arguments also misconstrue the First Circuit’s decision in Pratt in several
significant ways. First, he asserts that the “gravamen” of the violation was the creditor’s failure
to release the lien. This is incorrect. The “gravamen” of the violation was GMAC’s refusal to
release the lien unless the debtor paid the full amount of the outstanding debt. Pratt, 462 F.3d at
20. Debtor also argues that once a creditor makes the decision not to repossess surrendered
collateral, the creditor has an affirmative duty to release its lien regardless of whether the debtor
requests such release. Nothing in the Pratt or Canning decisions mandates that a creditor release
a lien without some compensation for its in rem interest. In fact, the First Circuit specifically
acknowledged that failure to release a lien on collateral that has some value is not objectively
coercive in and of itself. Canning, 706 F.3d at 71. If the collateral at issue is truly valueless,
then the creditor’s security interest in the property has no value and, thus, the “raison d’etre” for
its lien is extinguished. If, however, there remains a modicum of value and there is an entity
willing to pay that value, there is nothing objectively coercive about requiring payment of that
amount in exchange for releasing the lien.

The Panel also rejects Debtor’s argument that the presence of the five “material” facts
listed in Pratt “necessarily and as a matter of law establish an objectively coercive situation.”
(Appellant Br. at 15.) Although the First Circuit listed five facts as “material to [its] assessment
of objective coercion,” it also made clear that GMAC’s “pay in full” demand was a crucial factor
in its determination. Pratt, 462 F.3d at 19. As the First Circuit stated, “the core issue is whether
the creditor acted in such a way as to ‘coerce’ or ‘harass’ the debtor improperly” and such a
determination is dependent on the “particular facts” of the case. Id. (emphasis added) (citations
omitted). The only “material” fact that focused on the creditor’s actions was “GMAC
determined it was not cost effective to repossess the vehicle.” Id. The First Circuit determined
that this decision was well within GMAC’s rights and that the debtors’ surrender of the vehicle
under § 521 did not require GMAC to take possession of the vehicle. Thus, the five “material”
 No. 19-8026 In re Bentley Page 18

facts do not take into consideration any action that could serve as the basis for a violation of the
discharge injunction.

Additionally, the Pratt court never indicated that the presence of the five “material” facts,
without more, established a kind of strict liability and a court would be hard pressed to find a
sanctionable violation under them alone. Taggart requires a court to determine “there is no
objectively reasonable basis for concluding that the creditor’s conduct might be lawful” before
holding a party in contempt. Taggart, 139 S. Ct. at 1799 (emphasis added). Quite simply, in
order to be held in contempt, a creditor must do something other than decide not to repossess the
collateral. The five “material” facts set forth in Pratt do not consider any action by the creditor,
let alone something that demonstrates improper coercion or harassment.

Finally, Debtor misconstrues Pratt in arguing that it prohibits conversations such as the
ones that occurred between Debtor and Creditor in this case. Debtor argues that these
“conversations give creditors … the opportunity to request payment for a pre-petition obligation
under the guise of requesting a lien release, and thereby coerce often unrepresented debtors.”
(Appellant Br. at 21.) Again, the violation in Pratt was GMAC’s refusal to release the lien on a
worthless vehicle until the debtor paid the total amount due under the pre-petition note. The
violation had nothing to do with the fact that the debtors and GMAC had conversations post-
discharge. “[T]he discharge injunction in § 524(a)(2) does not prohibit all communications
between the secured creditor and the debtor, but only enjoins any actions and communications
designed to ‘collect, recover or offset’ the debt as a “ ‘personal liability of the debtor.’ ” In re
Cantrell, 605 B.R. 841, 853 (Bankr. W.D. Mich. 2019) (quoting 11 U.S.C. § 524(a)(2)).

Debtor argues that the only “purpose of the conversations” between Creditor and Debtor
was for Creditor to “request[ ] payment for the pre-petition obligation[.]” (Appellant Br. at 21.)
This is inaccurate. Debtor’s chapter 7 discharge only extinguished Debtor’s in personam
liability for the car note. It had no effect on Creditor’s in rem lien rights in the Vehicle. The lien
survived the discharge and was enforceable under state law to the extent of the Vehicle’s value.
Both Debtor and Mr. Reis asserted that the Vehicle had some value as scrap. Therefore,
Creditor’s statement that it would consider releasing the lien in exchange for payment of this
value was not a request for payment of the pre-petition obligation and was not objectively
 No. 19-8026 In re Bentley Page 19

coercive. There was no evidence that Creditor ever attempted to impose any in personam
liability on Debtor.

Additionally, Debtor fails in his attempt to distinguish the First Circuit’s subsequent
decision in Canning. Debtor argues that Canning is not analogous because that case involved
real property. As the bankruptcy court recognized in its opinion, “[t]he difference in the [Pratt
and Canning] cases is in the facts, not that different law applies to surrender and in rem remedies
depending on the type of collateral involved.” Bentley, 607 B.R. 889, 897 (Bankr. E.D. Ky.
2019). The Pratt and Canning decisions both acknowledged the fact-specific nature of a
§ 524(a)(2) determination and placed great emphasis on the nature of the creditor’s demand in
comparison to the value of the collateral. The only significance the First Circuit placed on the
different types of collateral was in recognizing that a vehicle’s value rarely appreciates over time
whereas the value of real estate often does. Canning, 706 F.3d at 72. Although the value of the
collateral was at issue in both Pratt and Canning, the only role the nature of the collateral played
was in determining the residual value of the creditor’s collateral in comparison to the amount
creditor requested to release the lien.

Debtor also argues that this case is distinguishable from Canning because Creditor did
not prove that the Vehicle had value or that it had offered Debtor a “feasible” or “viable
alternative to continued ownership of the Vehicle.” (Appellant Br. at 25.) In making this
argument, Debtor improperly attempts to shift the burden of proof in this action from himself to
Creditor. It is the debtor who carries the burden of proving that a creditor violated the
§ 524(a)(2) discharge injunction. This includes the burden of demonstrating that a creditor’s
alternatives were “unfeasible.” Canning, 706 F.3d at 71. Additionally, the undisputed facts
demonstrate that Creditor’s actions in this case mirror the creditor’s actions in Canning. As in
Canning, Creditor exhibited a willingness to consider the various methods for disposing of the
Vehicle. In Canning, the creditor’s willingness to consider a settlement weighed heavy in the
First Circuit’s determination that it had not acted in a coercive manner.
 No. 19-8026 In re Bentley Page 20

Like the debtors in Canning, Debtor made no attempt to demonstrate why the settlement
Creditor proposed was unfeasible. The evidence demonstrated that Creditor was wholly willing
to release its lien once it received proof and payment of the Vehicle’s value. Although Debtor
argues in his appellate brief that the options Creditor gave were “unduly onerous and comprise
an impermissible burden on a debtor’s fresh start,” such argument is without merit. (Appellant
Br. at 22.) Creditor never required Debtor to do anything other than direct the party wishing to
take possession of the Vehicle to contact Creditor.7

Debtor also asserts he was burdened by the ownership of the Vehicle because he had to
pay personal property taxes for it, and it took up space on his property. A debtor’s surrender of
collateral “does not divest a debtor of ownership and its obligations.” Maple Forest Condo.
Assoc. v. Spencer (In re Spencer), 457 B.R. 601, 612 (E.D. Mich. 2011) (citations omitted).
And, as Pratt and Canning make clear, a debtor’s surrender of collateral under § 521 does not
require a creditor to take possession thereof. Pratt, 462 F.3d at 19; Canning, 706 F.3d at 69-70.
Until title of the Vehicle was transferred to a third party, Debtor was responsible for the
obligations associated with ownership.8

Lastly, Debtor asserts the bankruptcy court erred in failing to analyze the case under
Taggart. As stated supra, the bankruptcy court determined that Creditor did not violate the
discharge injunction. As such, the court concluded it did not need to determine whether
Creditor’s actions were sanctionable under Taggart. The bankruptcy court did not err in this
decision. Taggart is only applicable after a court has found that a party violated the discharge
order. Roth v. Nationstar Mortg., LLC (In re Roth), 935 F.3d 1270, 1276 (11th Cir. 2019). Thus,
if the creditor did not violate the discharge injunction, there is no need to analyze the creditor’s
actions under Taggart.

7Debtor also argues that his inability to “convince” Creditor to accept an offer to release the lien proves
how burdensome Creditor’s “demands” were. There is no evidence that Creditor ever received an offer in this case.
Thus, there was nothing for Creditor to accept or reject.
8Debtor cites additional cases in his brief that the Panel finds easily distinguishable or inapplicable. As
such, it is unnecessary to address them.
 No. 19-8026 In re Bentley Page 21

CONCLUSION

In this case, the bankruptcy court correctly interpreted the summary judgment standard
under Federal Rule of Civil Procedure 56, the discharge injunction of 11 U.S.C. § 524(a)(2), and
the First Circuit’s decision in Pratt v. GMAC (In re Pratt), 462 F.3d 15 (1st Cir. 2006). It also
committed no clear error in analyzing the facts in the case. As such, the Panel affirms the
bankruptcy court’s October 2, 2019 memorandum opinion and order.