United States District Court, E.D. Kentucky, Southern Division
MEMORANDUM OPINION & ORDER
Gregory F. Van Tatenhove United States District Judge.
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.
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. [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.
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.
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. Ms. Chandler did not tender another
payment until October 3, 2013. [R. 31 at ¶ 32.]
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.]
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:
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
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.
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.
Chandler made another payment on December 30, 2013, which she
believed had been due on November 7 (fifty-three days late),
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.
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. Id. at 41.
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 ¶
45. Peoples Bank applied the other payment to the January 7,
2014, due date (forty-nine days late), though Ms. ...