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Arbitration of FCRA claim survives bankruptcy discharge

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A man’s Fair Credit Reporting Act claim can be arbitrated even though the debt was addressed and discharged in bankruptcy proceedings, the Indiana Court of Appeals ruled today.

Brian Brough entered into a contract with Green Tree Servicing, in which Green Tree loaned Brough money to buy a mobile home. The contract included an arbitration clause. Brough also agreed that Green Tree could share information about him and his account with credit reporting agencies.

Brough defaulted on the contract and filed for bankruptcy in 2003. His debt to Green Tree was addressed in the proceedings and the bankruptcy court discharged Brough’s petition in November 2008. Green Tree then filed a suit against Brough, which wasn’t identified in the appeal, and Brough filed a counterclaim alleging Green Tree violated the Fair Credit Reporting Act by reporting to credit agencies that he still owed the company a debt under the contract even though the matter was discharged in bankruptcy.

The trial court granted Brough’s request to vacate the arbitration order.

At issue in Green Tree Servicing LLC v. Brian D. Brough, No. 88A01-0911-CV-550, is whether the FCRA claim is subject to the arbitration provision in the contract.

The appeals court looked to U.S. District Court rulings from New York and Illinois to conclude that FCRA claims can be subject to arbitration clauses. In addition, Brough even admitted his claim is subject to the arbitration clause, noted Senior Judge John Sharpnack.

The judges also disagreed with Brough’s argument that the whole contract is not valid because it was terminated by his bankruptcy discharge. Again, the court looked outside of Indiana for authority and relied on In re Wells Fargo Bank, N.A., 300 S.W.3d 818 (Tex. Ct. App. 2009). In that case, homeowners who defaulted on a home equity loan and filed for bankruptcy claimed they didn’t have to arbitrate the suit they filed against the lender because the bankruptcy proceedings released them from any further obligations under their agreements with the lender, including an agreement to arbitrate. The Texas appellate court ruled the arbitration agreement survived bankruptcy.

As is the case In re Wells, Brough’s bankruptcy proceeding ended, so the arbitration of his FCRA claim won’t jeopardize the bankruptcy case or affect his discharge, wrote Senior Judge Sharpnack. The contract’s arbitration clause wasn’t terminated by his bankruptcy discharge. The trial court must order the parties to attend arbitration.
 

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  1. I just wanted to point out that Congressman Jim Sensenbrenner, Senator Feinstein, former Senate majority leader Bill Frist, and former attorney general John Ashcroft are responsible for this rubbish. We need to keep a eye on these corrupt, arrogant, and incompetent fools.

  2. Well I guess our politicians have decided to give these idiot federal prosecutors unlimited power. Now if I guy bounces a fifty-dollar check, the U.S. attorney can intentionally wait for twenty-five years or so and have the check swabbed for DNA and file charges. These power hungry federal prosecutors now have unlimited power to mess with people. we can thank Wisconsin's Jim Sensenbrenner and Diane Feinstein, John Achcroft and Bill Frist for this one. Way to go, idiots.

  3. I wonder if the USSR had electronic voting machines that changed the ballot after it was cast? Oh well, at least we have a free media serving as vicious watchdog and exposing all of the rot in the system! (Insert rimshot)

  4. Jose, you are assuming those in power do not wish to be totalitarian. My experience has convinced me otherwise. Constitutionalists are nearly as rare as hens teeth among the powerbrokers "managing" us for The Glorious State. Oh, and your point is dead on, el correcta mundo. Keep the Founders’ (1791 & 1851) vision alive, my friend, even if most all others, and especially the ruling junta, chase only power and money (i.e. mammon)

  5. Hypocrisy in high places, absolute immunity handed out like Halloween treats (it is the stuff of which tyranny is made) and the belief that government agents are above the constitutions and cannot be held responsible for mere citizen is killing, perhaps has killed, The Republic. And yet those same power drunk statists just reel on down the hallway toward bureaucratic fascism.

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