In 1975, the debtor obtained a federally insured student loan. The debtor filed under chapter XIII of the Bankruptcy Act of 1898 in 1979 and received a discharge in 1983. In 1998, Educational Credit Management Corporation acquired title to her student loan debt. ECMC sent the debtor a letter asking for documents relating to her discharge; the debtor did not reply. In 2004, ECMC began efforts to collect the debt, which included phone calls during which the debtor asserted that she did not owe the debt and that it was discharged by the order in 1983. Further, ECMC notified the debtor that it intended to offset her federal income tax refund, and in 2006 the Department of Treasury offset the tax refund and forwarded those funds to ECMC.
The debtor moved to reopen the case and filed an adversary complaint seeking a declaration that the debt was discharged by order entered in the 1978 case. The Court filed a judgment granting her request. The judgment was based on the conclusion that the discharge orders that issued in bankruptcy cases that were filed between November 6, 1978, and August 14, 1979, discharged all debts arising from governmentally insured student loans. The judgment was affirmed after ECMC appealed the judgment to the United States District Court for the Western District of Virginia. ECMC refunded all collected monies to the Plaintiff and marked the debt as “discharged” on its books.
The debtor then filed a motion for sanctions against ECMC based on alleged violation of the discharge injunction. The Court made several findings: When ECMC acquired ownership of the debt, it contacted the debtor through a 1998 letter but received no response. Over a six-year period it attempted to gather facts that would permit it to determine whether the debt was dischargeable. Before offsetting the debtor’s income tax refund in 2004, ECMC again contacted the debtor with the request for review, but again received no response. When the debtor finally contacted ECMC seven years after ECMC’s first attempt to resolve the matter, ECMC correctly explained that its position was consistent with the weight of judicial authority. When, two years later, the debtor hired an attorney and took steps to reopen the 1979 case, ECMC ceased all collections immediately. The Court concluded that at no time did ECMC knowingly and wilfully violate the discharge order.
