B-Line purchased a charge account that the Debtors originally had with Kay Jewelers, which had been listed as a creditor on Schedule F of the Debtors’ petition, with a balance owing of $860.61. Following the filing of the Debtors’ bankruptcy, B-Line solicited a reaffirmation from the Debtors, including a warning/threat that “If the Jewelry purchased under this secured account have been destroyed, gifted or transferred, or sold, [B-Line] may have a non-dischargeability cause of action against you/your client(s) under 11 U.S.C. § 523.” In response, the Debtors initiated a adversary proceeding against B-Line, alleging that B-Line violated N.C.G.S. § 58-70-1 because it carried on a “collection agency business” without securing a permit through the Commissioner of Insurance before it solicited a reaffirmation agreement. Additionally, the Debtors alleged that the the solicitation of a reaffirmation agreement by B-Line was an attempt to collect a debt by the use of unfair practices “within the meaning of North Carolina General Statute § 75-1.1.
Following Jenkins v. Genesis Fin. Solutions (In re Jenkins), 456 B.R. 236 at 238 (Bankr.E.D.N.C.
Sept. 19, 2011), the bankruptcy court held that, in the absence of coercion or harassment, the solicitation of a reaffirmation did not constitute an effort to “‘collect” within the meaning N.C.G.S. §§ 58-70-1 or 75-1.1, as reaffirmations are not the traditional debt collection practices which the North Carolina General assembly was trying to regulate.
The best practice with jewelry store reaffirmations, which invariably include a threat of a non-dischargeability action if the items purchased were given as gifts, is to ignore such threats. Very rarely does a creditor (let alone a debt buyer) follow through and commence a discharge action. Even if such an adversary proceeding were brought, it would be nearly impossible for to show that it was improper to give jewelry as a gift, since gift-giving is nearly the entire basis for the jewelry industry. Once such an baseless adversary is brought, the Debtor can respond by seeking damages under 11 U.S.C. § 523(d).
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