Brunner-Halteman is not the first case in which ECMC has been found guilty of abusing the bankruptcy process. In Hann v. ECMC, decided in 2013, the First Circuit Court of Appeals upheld a lower court decision against ECMC for continually trying to collect on student loans it claimed were owed by Barbara Hann, even though a bankruptcy judge had ruled that Hann owed ECMC nothing.
Hann v. ECMC: Sanctions are imposed on ECMC for abusing the bankruptcy process
Here is a brief rendition of the facts. Barbara Hann filed for bankruptcy in November 2004, and she dutifully listed all her debts. ECMC filed a proof of claim in the case, alleging Hann owed ECMC more than $54,000 for unpaid student loans (including accrued interest and collection costs).
Hann objected to ECMC's claim on the grounds that she had paid her student loans in full. The bankruptcy judge held a hearing on the matter, which ECMC did not attend.
At the hearing, Hann testified that she had paid off her student loans and produced documentary evidence to support her testimony. After considering Hann's evidence, the bankruptcy judge ruled that Hann owed ECMC nothing.
Hann probably thought her student debts were behind her, but she was wrong. After her bankruptcy case was concluded, ECMC renewed its efforts to collect on Hann's old student loans. In fact, it even garnished her Social Security.
Richard Gaudreau, Hann's lawyer, contacted ECMC and told the company that Hann's student-loan debt had been discharged in bankruptcy. Nevertheless, ECMC continued trying to collect the debt.
Gaudreau then reopened Hann's bankruptcy case and asked a new bankruptcy judge to order ECMC to stop its collection efforts. ECMC showed up for the hearing, where it, argued that the former bankruptcy judge, who had retired, had never adjudicated the amount of ECMC's claim and that student-loan debt is generally nondischargeable. ECMC, did not, however, quantify how much it claimed Hann still owed.
Again, a bankruptcy judge ruled in Hann's favor, and the judge awarded sanctions against ECMC. ECMC appealed this order to the First Circuit's Bankruptcy Appellate Panel, and the Panel upheld the bankruptcy court. The BAP specifically approved the sanctions against the debt collector, explaining that ECMC's continued collection activities in spite of the bankruptcy court's ruling, "constituted an abuse of the bankruptcy process and defiance of the court's authority."
Did ECMC get the message? Apparently not. ECMC then appealed the BAP's ruling to the First Circuit Court of Appeals, On March 29, 2013, almost nine years after Hann filed for bankruptcy, the First Circuit ruled in Hann's favor yet again. Hann owed ECMC nothing, the appellate court ruled; and the bankruptcy court had appropriately sanctioned the debt collector for abusing the bankruptcy process.
Implications of the First Circuit's ruling in Hann v. ECMC
The Hann case is extraordinary for two reasons. First, ECMC defended its right to collect on Hann's student loans all the way to the First Circuit Court of Appeals, despite its "repeated inability to identify or quantify [Hann'] outstanding debt obligation" to the bankruptcy court.
Second, the sanctions that ECMC fought were not large: only about $9,000. Clearly, it made no economic sense for ECMC to fight a pitifully small sanction award at two appellate levels. Surely, ECMC's attorney fees were many times the amount of the sanctions award.
Taken together, the Bruner-Halteman decision and the Hann decision portray ECMC as a pretty rough outfit. It has appeared in hundreds of court cases involving student-loan debtors, and surely it knows the Bankruptcy Code. Yet it was willing to garnish Bruner-Halteman's wages 37 times in defiance of settled law and to continue trying to collect on student loans that had been discharged in bankruptcy.
Who paid ECMC's attorney fees in these two wild-hare cases? It is not entirely clear, but the Century Foundation's report on ECMC and other student-loan guaranty agencies suggests that the federal government is paying ECMC's fees.
If that is true, then you, Mr. and Ms. Taxpayer, are paying ECMC's lawyers to hound distressed student-loan debtors through the federal courts. Don't you think we should find out? And wouldn't that be a good question for the U.S. Senate to explore through its hearing process?
Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).
Hann v. Educational Credit Management Corporation, 711 F.3d 235 (1st Cir. 2013).
John Hechinger. Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans. Bloomberg.com, May 15, 2013. Accessible at: http://www.bloomberg.com/news/2012-05-15/taxpayers-fund-454-000-pay-for-collector-chasing-student-loans.html
Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. Acccessible at http://www.nytimes.com/2014/01/02/us/loan-monitor-is-accused-of-ruthless-tactics-on-student-debt.html?_r=0
Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/