In re Bushman
UNPUBLISHED
The debtors filed a motion for sanctions against a creditor for willful violation of the discharge injunction of 11 U.S.C. §524. Following the debtors' receipt of a chapter 7 discharge in a no asset case, a creditor filed suit against the debtors in state court seeking to collect on a pre-petition guaranty that one of the debtors executed for the benefit of his corporation. The debtors attempted to defend the state court action by claiming the debt received discharge in bankruptcy but the creditor continued to prosecute the case claiming the debtors had continuing liability on the guaranty, the debt did not exist as of the date of filing, and the debtors remained obligated because the creditor was not listed on the debtors' schedules. The court found the creditor acted in violation of the injunction imposed by §524 when it pursued its collection action against the debtors in state court. The court determined the personal guaranty executed by one of the debtor's was an executory contract for financial accommodation which was extinguished as of the date of petition. The court was unable to sanction the creditor because the debtors did not offer any proof of actual damages.