The Bankruptcy Code provides that creditors holding nondischargeable claims may pursue post-confirmation collection efforts. For example, § 1141(a), provides that a confirmed plan binds the debtor and the debtor’s creditors, “except as provided in subsections (d)(2),” which subsection provides that the confirmation of a plan does not discharge an individual debtor from debts that are nondischargeable under § 523 of the Bankruptcy Code. Thus, if debts are not discharged upon confirmation of the debtor’s plan, a creditor is permitted to proceed with its post-confirmation collection efforts outside of the bankruptcy case.
A debtor’s immediate reaction to a post-discharge claim is to assert a violation of the discharge injunction. However, bankruptcy courts, including the Bankruptcy Court for the Middle District of Florida, have held that when a debt is not discharged in a bankruptcy proceeding, whether due to the debtor’s inadvertence or intentional failure to schedule the debt, the debtor may not sustain a claim for damages for violation of the permanent discharge injunction.
Because the penalty for violation of a discharge injunction is significant, creditors should still proceed with caution before initiating collection efforts on a potentially non-discharged debt. Creditors who have missed the deadline for filing a dischargeability complaint because of the debtor’s failure to schedule a debt will not likely be further prejudiced by waiting for a judicial determination of dischargeability before sending a demand letter. Furthermore, because the debtor bears the more onerous burdens of proof at each stage of the process, the cost of litigating the claim is significantly lower for creditor than debtor.