The First Circuit Bankruptcy Appellate Panel recently reversed a decision of the Maine Bankruptcy Court in the case of In re Lumb. Lumb, represented by Joseph Goodman, Esq. of Portland, Maine, filed a Chapter 7 bankruptcy petition in 2001. After filing, a creditor, Nahabet Cimenian, threatened to sue Lumb's wife if Lumb didn't pay him regarding the debt owed to Cimenian. When Lumb didn't pay, Cimenian sued Lumb's wife in state court. After extensive litigation, in which Lumb incurred over $50,000 of attorneys fees, Lumb's wife won the lawsuit and the Maine Supreme Court concluded that the Cimenian lawsuit was baseless and frivolous. As a result, the state court ordered Cimenian to pay Lumb's attorneys fees in defending the lawsuit.
Lumb filed a complaint in the Bankruptcy Court against Cimenian asserting that Cimenian violated the discharge injunction for initiating the state court lawsuit because it was a disguised effort to collect the debt from Lumb personally. The Bankruptcy Court concluded that the state court lawsuit did not act a an effort to collect a debt from Lumb. The BAP, using the First Circuit Pratt decision as its supporting authority, concluded that Lumb had asserted sufficient facts to entitle Lumb to a trial in the Bankruptcy Court on the alleged discharge injunction violation. The Pratt decision held that creditors who are improperly coercive in their conduct can be found to violate the discharge injunction. Joe Goodman's successful argument is a victory for all debtors who are agressively pursued by creditors in devious ways notwithstanding a bankruptcy filing.
The Bankruptcy Court will hold further hearings on Lumb's complaint in the near future.