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Chandler v. Peoples Bank & Trust Co. of Hazard

United States District Court, E.D. Kentucky, Southern Division

March 26, 2018

TERESA CHANDLER, Plaintiff,
v.
PEOPLES BANK & TRUST CO. OF HAZARD, Defendant.

          MEMORANDUM OPINION & ORDER

          Gregory F. Van Tatenhove United States District Judge.

         After a debtor files a petition for bankruptcy, the debtor may voluntarily reaffirm any debt obligation that would otherwise be discharged during bankruptcy proceedings. A reaffirmation agreement between the debtor and the creditor allows the debtor to keep the collateral he or she would potentially forfeit in bankruptcy by agreeing to remain liable for the debt. This case comes before the Court because Ms. Chandler signed such an agreement with Peoples Bank & Trust Company of Hazard to reaffirm debt owed by Ms. Chandler on her mobile home. However, Ms. Chandler later sued Peoples Bank because of a disagreement in how Peoples Bank applied her payments to the loan balance. Peoples Bank filed a Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(6) [R. 33], and Ms. Chandler subsequently filed a Response [R. 34]. For the foregoing reasons, Defendant Peoples Bank & Trust Co. of Hazard's Motion is GRANTED.

         I

         Plaintiff Teresa Chandler and her husband, Jerry Chandler, took out a loan with Peoples Bank on May 7, 2012, secured by their mobile home. [R. 31 at ¶ 5.] This loan was for $9, 882.32 at an interest rate of 11.00% to be paid over the course of four years. Id. at ¶ 7. The Chandlers were to pay $136.19 due on the seventh of every month for forty-seven months, plus a balloon payment of the remaining balance due on May 7, 2016, for a total of forty-eight payments. Id. Ms. Chandler and her husband filed for Chapter 7 Bankruptcy relief on July 30, 2013. Id. at ¶ 9. At the time of filing, Ms. Chandler admits she had made thirteen timely payments, but had not yet paid the $136.19 due on July 7, 2013. Id. at ¶ 10. Peoples Bank filed a Proof of Claim, stating the principle remaining on the loan was $9, 260.38, plus $164.94 in accrued interest and $40.86 in late fees, for a total of $9, 466.18 due to Peoples Bank.[1] [R. 31-1 at 4.] On August 8, 2013, after filing bankruptcy but before entering a reaffirmation agreement, Ms. Chandler made her fourteenth payment of $136.19 to Peoples Bank. [R. 31 at ¶ 11.] Peoples Bank applied that payment to the missed July 7, 2013, payment. Id. at ¶ 25.

         Nearly a week later, on August 14, 2013, Peoples Bank generated a Reaffirmation Agreement. [R. 33-1 at 11.] The new agreement reaffirmed a debt of $9, 355.02. [R. 31-2 at 2.] This reflects the original $9, 466.18 due at the time of bankruptcy less the $136.19 paid on August 8, plus additional interest accrued after the Proof of Claim was generated. [R. 33-1 at 5.] Ms. Chandler and her husband signed the agreement on August 20, 2013, their attorney signed the agreement on August 21, 2013, and Peoples Bank signed on August 26, 2013. [R. 31-2 at 7.] Therefore, the earliest the Reaffirmation Agreement could have been in place was on August 20, 2013, and the earliest Ms. Chandler could have relied on the contract was on August 14, 2013, when the agreement was generated. Ms. Chandler agreed to thirty-four months of payments, beginning on August 7, 2013, at the original payment amount of $136.19 per month, except for the final payment on May 7, 2016, when any remaining balance would be due. Id. at 5. Prior to the entry of this agreement, on August 19, 2013, Ms. Chandler had made fourteen of the forty-eight total payments and had not made the payment that was due August 7, 2013.

         The reaffirmation agreement did not change the credit terms: the balance due, annual percentage rate, and monthly payment each remained the same after the reaffirmation agreement as they were on the date of filing bankruptcy. Id. The reaffirmation agreement became effective upon filing with the court on September 11, 2013. Id. at 5 (stating debtor was represented by an attorney and creditor was not a credit union), 9.[2] Ms. Chandler did not tender another payment until October 3, 2013. [R. 31 at ¶ 32.]

         Ms. Chandler's complaint focuses on how Peoples Bank should have applied the payment made on August 8, 2013. Ms. Chandler believes that the payment, made after the August 7, 2013, “start date” of the Reaffirmation Agreement, should be applied to the August 7, 2013, due date. Id. at ¶¶ 20-27. Peoples Bank maintains that the payment, made prior to the formation of the Reaffirmation Agreement, was correctly applied to the July 7, 2013, due date. [R. 33-1 at 5.] Because of this discrepancy between how Ms. Chandler believes the payment should have been applied and how Peoples Bank actually applied the payment, Peoples Bank reported her to credit reporting agencies as being past due for several occasions when Ms. Chandler either believes she was not past due, or not as many days past due as Peoples Bank reported her to be. Ms. Chandler and her husband disputed the credit reports to Equifax Information Services, LLC, Experian Information Solutions, Inc., and Trans Union, LLC. [R. 31 at ¶ 56-62.] Peoples Bank maintains that their application of Ms. Chandler's payments is correct, and therefore, Peoples Bank had no duty to provide updated information to the credit reporters. [R. 33-1 at 13-14.]

         According to Ms. Chandler, creditors report a payment as “past due” to a credit reporting company once the payment is at least thirty days past due. [R. 31 at ¶ 28-29.] A payment made between thirty and fifty-nine days late is reported as a “thirty-day late entry, ” a payment made between sixty and eighty-nine days past the due date is reported as a “sixty-day late entry, ” and a payment made more than ninety days past the due date is reported as a “ninety-day late entry.” [R. 34 at 3-4.] The following is a summary of the payments made and why Ms. Chandler believes Peoples Bank incorrectly reported them to her credit reporting agencies:

         1. When Ms. Chandler rendered a payment on August 8, 2013, Ms. Chandler believed that payment was due on August 7, which would have been one day late and not reported to credit agencies. [R. 31 at ¶¶ 25-29.] Peoples Bank believed this payment was due on July 7, thus thirty-two days late. Id.

         2. Ms. Chandler made her first post-reaffirmation payment on October 3, 2013, which she believed was due on September 7 (twenty-six days late) and Peoples Bank believed was due on August 7 (fifty-seven days late). Id. at ¶ 32-33. Peoples Bank reported Ms. Chandler's account was thirty days late for August of 2013. Id. at 35.

         3. Ms. Chandler made a second payment that month on October 31, 2013, which she believed was due on October 7 (twenty-four days late) and Peoples Bank believed was due on September 7 (fifty-four days late). Id. at ¶36-37. Peoples Bank reported Ms. Chandler's account was thirty days late for September of 2013. Id.

         4. Ms. Chandler made another payment on December 30, 2013, which she believed had been due on November 7 (fifty-three days late), [3] but Peoples Bank applied the payment to the October 7, 2013, due date (eighty-four days late). Id. at ¶¶ 39-40. Peoples Bank reported Ms. Chandler's account was sixty days late in October 2013. Id. at ¶ 38.

         5. Ms. Chandler made the next payment on February 14, 2014, which Peoples Bank applied to the November 7, 2013, due date (ninety-nine days late), but Ms. Chandler believes should have been applied to the December 7, 2013, due date (sixty-nine days late). Id. at ¶¶ 42-43. Peoples Bank reported this payment as a ninety-day late entry for November.[4] Id. at 41.

         6. Ms. Chandler rendered two payments on February 25, 2014. Id. at ¶ 44. Peoples Bank applied one of these to the December 7, 2013, due date (eighty days late), though she believes it should have been applied to the January 7, 2014, due date (forty-nine days late). Id. at ΒΆ 45. Peoples Bank applied the other payment to the January 7, 2014, due date (forty-nine days late), though Ms. ...


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