Debtors owned their home as tenants by the entireties, but only one Debtor signed the promissory note and deed of trust. Thus, Creditor’s security interest never attached. Debtors received a personal discharge of their debts under Chapter 7. Following Debtors’ discharge, Creditor filed an action in state circuit court seeking to reform the deed of trust for the home and to create a constructive trust for unjust enrichment. Debtors sought an injunction against Creditor in order to prevent Creditor from pursuing its counts in circuit court and sought sanctions against Creditor for violating 11 U.S.C. § 524(a). The Court explained that Creditor did not violate 524(a) by requesting to reform the deed of trust, but that Creditor would violate § 524(a) if it continued to pursue its unjust enrichment claim. The Court thus found that sanctions against Creditor were not appropriate. The Court denied Debtors’ motion for a permanent injunction to keep Creditor from pursuing its claims in circuit court, but cautioned Creditor against pursuing the unjust enrichment claim.
Friday, September 30, 2016
Chapter 7 Issues