Judge Tancredi – Debtor’s Discharge Violation Case Against PHH Thrown Out

Posted by David Falvey on Saturday, May 31st, 2025 - 44 views

Case Facts

Samuel Aaron Laurion, a Chapter 7 debtor, initiated an adversary proceeding against PHH Mortgage Corporation, alleging that PHH violated the discharge injunction following his bankruptcy. Laurion had previously quitclaimed his mortgaged property to a trust he controlled. He claimed PHH violated 11 U.S.C. § 524(a) through (1) its suspense account policy, (2) issuing a loan statement with an ambiguous bankruptcy disclaimer, and (3) sending a payoff statement in response to his own request that lacked clear reference to his discharged status. He sought damages of $150,000, injunctive relief, and a release of the mortgage lien.

Issue(s):

1. Did PHH’s actions or communications constitute violations of the discharge injunction under 11 U.S.C. § 524(a)?
2. Did PHH’s internal policies or standard communications amount to acts of debt collection in violation of the discharge?
3. Should Laurion be permitted to amend his complaint to include claims based on fraud and sovereign citizen legal theories?

Judge’s Decision (Holding):

The court granted PHH’s Amended Motion to Dismiss and dismissed the adversary proceeding with prejudice. It held that none of the alleged actions by PHH constituted a plausible violation of the discharge injunction. The court also denied leave to amend the complaint, finding that any amendment would be futile.

Decision Reasoning:

1. Suspense Account Policy – Laurion alleged harm from PHH’s general practice of holding partial payments in suspense but failed to show this applied to him or that any payment was actually made or held. The court held there was no “act” under § 524(a)(2), making this claim implausible.
2. Loan Statement Disclaimer – The October 2024 loan statement included language approved by the CFPB’s Regulation Z (12 C.F.R. § 1026.41). The court found the disclaimer sufficient and compliant, noting that the statement was for informational purposes and did not attempt to collect a discharged debt.
3. Payoff Statement Response – Laurion requested debt verification; PHH complied and included a cover letter explicitly stating that it acknowledged the discharge and was not pursuing personal collection. The court found this communication lawful and not misleading.
4. Leave to Amend – Laurion’s attempts to amend introduced vague fraud allegations and sovereign citizen rhetoric (e.g., invoking trust law and the gold standard). The court found these arguments legally baseless and held that amendment would be futile, noting a consistent pattern of frivolous and dilatory filings.