## Facts

- Individual Chapter 7 debtors received a discharge in a 1994 bankruptcy case; a consumer debt originally owed to Dallas Leasing was later assigned to Dynamic Recovery Services, Inc.
- Years after discharge, the debtors were denied a mortgage after a credit report reflected the debt as outstanding.
- The debtors alleged Dynamic offered to “correct” the credit reporting only if they paid the discharged debt (about $2,582), and they paid to avoid losing the mortgage opportunity.
- The debtors claimed delayed correction caused higher interest and additional closing costs on the eventual mortgage.
- The debtors filed an adversary proceeding alleging violation of the discharge injunction under 11 U.S.C. § 524(a)(2) and asserting claims under the Fair Debt Collection Practices Act (FDCPA).
- Dynamic did not answer; the debtors moved for default judgment.
- The court set an evidentiary hearing because damages were unliquidated and the basis for FDCPA jurisdiction was unclear.
- At the hearing, counsel appeared but the debtors did not; no witnesses testified and no documents were admitted, and counsel provided only an offer of proof repeating the complaint.

## Issues

1. Whether the court should enter default judgment where the defendant failed to respond but the plaintiffs presented no evidence at the Rule 55(b) hearing.
2. Whether the plaintiffs established a prima facie violation of the discharge injunction under 11 U.S.C. § 524(a)(2) based on alleged credit-reporting pressure to collect a discharged debt.
3. Whether the bankruptcy court had authority and jurisdiction to grant relief under the FDCPA in the adversary proceeding, and whether FDCPA liability and damages were shown.
4. Whether the plaintiffs proved unliquidated compensatory damages and entitlement to attorney’s fees.

## Decision

- The court denied the motion for default judgment.
- The court held that default does not establish legal conclusions or unliquidated damages; plaintiffs must prove entitlement to relief.
- The court found the record lacked competent proof that the specific debt was discharged, that Dynamic engaged in coercive collection conduct, and that the alleged mortgage-related damages were caused and quantifiable.
- The court declined to enter default judgment on the FDCPA claim because plaintiffs neither established a jurisdictional basis for FDCPA relief in bankruptcy court nor proved the elements of FDCPA liability and damages.

## Legal Principles

- Under Fed. R. Civ. P. 55(b) (as incorporated by Fed. R. Bankr. P. 7055), entry of default judgment is discretionary; a court may require a hearing to establish liability, damages, and other necessary matters, especially for unliquidated damages.
- A default admits well-pleaded factual allegations, but not legal conclusions; the plaintiff bears the burden to establish a sufficient factual and legal basis for the requested judgment.
- 11 U.S.C. § 524(a)(2) enjoins acts to collect a discharged debt as a personal liability of the debtor; claims seeking sanctions or other relief for discharge-injunction violations require proof of the discharge’s applicability, the creditor’s conduct, and resulting harm.
- When a complaint asserts non-bankruptcy federal statutory claims (such as the FDCPA) in an adversary proceeding, the plaintiff must establish the court’s jurisdiction and authority to award that relief and must prove the statute’s elements and damages.

## Conclusion

The bankruptcy court denied default judgment because the plaintiffs, despite the defendant’s default, failed to present evidence establishing a discharge-injunction violation, failed to prove unliquidated damages and attorney’s fees, and did not demonstrate a jurisdictional and evidentiary basis for FDCPA relief.


In re Vogt, 257 B.R. 65 (Bankr. D. Colo. 2000)