Henry v. Associates Home Equity Services, Inc. (In Re Henry)

OPINION

I. Introduction

The district court has referred to this court the bankruptcy issues in this adversary proceeding, which was filed in that court. After summary judgment proceedings and trial on the merits of the triable issues of fact, the court finds that defendant Associates Home Equity Services, Inc., formerly known as Ford Consumer Finance Co. (collectively referred to herein as “Associates”), violated both the automatic stay and the discharge injunction in the bankruptcy case filed by the debtors in this court.

Because the debtors filed a statement of intention in their bankruptcy case which stated that they intended to keep their home and to make the mortgage payments thereon, the court finds that the secured creditor may reasonably contact *466 the debtors in writing to determine how the debtors intend to pay their mortgage. However, the court finds that few of the approximately 90 contacts with the debtors after the bankruptcy filing were proper, and that most violated the automatic stay or the discharge injunction.

In consequence, the court finds that the debtors are entitled to recover $6,570 that they paid to Associates after they filed their bankruptcy petition (plus interest). The court further assesses $65,700 in punitive damages against Associates for its intentional violation of the automatic stay and the discharge injunction.

II. Facts

Debtors Michael and Vicki Henry filed their chapter 7 1 bankruptcy case on November 19, 1997. Unlike more than 30% of the debtors in this district, the Henrys were represented by counsel in their bankruptcy case. Apart from their house, two fully encumbered motor vehicles and an old motorcycle, their only assets of substantial value were two retirement accounts holding some $7600, one of which provided partial security for a $7000 credit union loan. In addition to five underse-cured creditors and unpaid real estate taxes, the debtors had a dozen unsecured creditors.

At the time of the bankruptcy filing, Associates held a first mortgage on the debtors’ principal residence with a balance of approximately $119,900. It is not clear whether the value of the house 2 exceeded the debt owing to the first mortgage holder. Nonetheless, there were also two junior encumbrances on the property.

Together with their bankruptcy petition, the debtors filed their Statement of Intention, which disclosed that they intended to surrender their 1986 Dodge Ram “upon demand,” and that they intended to retain their house, their retirement accounts and their 1994 Chevy Astrovan.

The debtors used an obsolete version of Official Form 8 (which had been replaced effective September 1997, two months before they filed their case) that did not track either the statute or the applicable case law. The form has two categories: “Property To Be Surrendered” and “Property To Be Retained.” With respect to property to be retained, the form provides five columns. The first two columns, for the description of the property 3 and the creditor’s name, are straightforward. The three remaining are, “Debt will be reaffirmed pursuant to § 524(c),” “Property is claimed as exempt and will be redeemed pursuant to § 722,” and “Lien will be avoided pursuant to § 522(f) and property will be claimed as exempt.” No entries are made in any of these columns. Instead, the debtors placed an asterisk after the name of each creditor in the second column, and a line at the bottom of the form that said, “ *Debtors are current & continuing payments.” With their petition the debtors also filed a “Declaration of Debtor(s) re: Performance under 11 *467 U.S.C. § 521(2)(A) and (B),” which stated that they had complied with these provisions. In fact, the parties agree that the debtors were in default for approximately two payments on their first mortgage on their date of filing.

Curiously, the debtors did not claim that their home was exempt property. Their Form 6, Schedule C (“Property Claimed as Exempt”) only lists personal property, two retirement plans, and two small bank accounts. Apparently the debtors did not think it necessary to claim an exemption in their house, because on Schedule A (Real Property) they stated that its equity was $2,304, and that after $11,200 in costs of sale (8% of its fair market value) there was no net equity. See Soost v. NAH, Inc. (In re Soost), 262 B.R. 68, 71-74 (8th Cir. BAP 2001) (holding that, where debtors claimed a $1.00 exemption in real property, the excess equity is property of the estate available for distribution to creditors).

The debtors’ chapter 7 case was uneventful. After the meeting of creditors, the trustee filed a no-asset report, and the case was closed on March 17, 1998, a week after the discharge was entered.

The debtors received their discharge on March 9, 1998. The discharge order states in part: “All creditors whose debts are discharged by this order ... are enjoined from instituting or continuing any action or employing any process or engaging in any act to collect such debts as personal liabilities of the above-named debtor.” 4

After the bankruptcy filing, the debtors made the following mortgage payments to Associates:

11/29/97 $1,300

1/30/98 1,230

2/28/98 400

3/5/98 1,240

4/98 1,200

5/29/98 1,200

Ultimately, Associates foreclosed on the debtors’ house on November 17, 1998 because the debtors were unable to make their post-bankruptcy payments. In this case Associates purchased the debtor’s property at the eventual foreclosure sale 5 , and resold it for $105,000 nine months later. The debtors moved out of the house on January 15,1999.

III. Analysis

The district court has referred six issues for this court to determine in connection with the plaintiffs’ class action:

1. Whether Defendant’s collection activities violated the automatic stay under § 362 of the Code?

2. Whether Defendant’s collection activities violated § 524(a)(2) of the Code and the related bankruptcy discharge?

3. Whether Defendant’s failure to take reasonable steps to reaffirm prepetition debt was a deliberate circumvention of § 524(c) of the Code?

4. Whether Defendant’s actions constitute civil contempt for violations of the automatic stay under § 362 and § 524(a)(2) of the Code and the related Bankruptcy discharge?

*468 5. Whether Defendant violated any other provisions of the Code?

6. Whether Defendant is liable to Plaintiffs for any damages, sanctions, and costs associated with violations of the Code and the amount of such liability?

The district court retained for itself, and did not refer to this court, matters relating to class-wide discovery, class certification, and matters relating to claims for violations of RICO and the Fair Debt Collection Practices Act. The district court stayed all of the matters that it retained pending this court’s determination of the referred issues.

A. Automatic Stay Violations— § 362

1. Applicable Law

Upon the filing of a bankruptcy case, § 362(a) imposes an automatic stay on all creditor collection activities against the debtor. It provides in part: “[A] petition filed under section 301, 302 or 303 ... operates as a stay, applicable to all entities, of ... (4) any act to create, perfect, or enforce any lien against property of the estate; ... (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title .... ” The Senate Report on § 362, when it was enacted in 1978, begins:

The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debt- or a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.

S. Rep. No. 95-989, at 54-55 (1979) (emphasis added). While § 362(b) provides eighteen categories of exceptions to the automatic stay, Associates makes no claim that it qualifies for any exception.

Functionally the automatic stay is a combination of a temporary restraining order and a preliminary injunction. It prohibits creditors from engaging in collection activities against a debtor for a limited period of time. The automatic stay differs from a temporary restraining order and a preliminary injunction in six ways: (1) it is automatic upon the filing of a bankruptcy petition and does not require a court order; (2) a debtor is not required to carry any burden of proof or provide any level of evidence to obtain it; (3) a creditor is not entitled to be heard, or even to be given notice, before it is imposed; (4) it requires no bond; (5) it is binding on all creditors, whether or not they have notice of it, and lack of notice is chiefly a defense to punitive damages.

Finally, the automatic stay and the discharge injunction are statutory, and are the same in every bankruptcy case filed in every court in the United States. Walls v. Wells Fargo Bank (In re Walls), 262 B.R., 519, 528 (Bankr.E.D.Cal.2001). Their extent does not depend on individual orders fashioned by individual bankruptcy judges. Id.

The Ninth Circuit has addressed the impact of the automatic stay on numerous occasions. For example, it has recently stated:

The stay is self-executing, effective upon the filing of the bankruptcy petition, and sweeps broadly, enjoining the commencement or continuation of any judicial, administrative or other proceedings against the debtor, enforcement of prior judgments, perfection of liens, and any act to collect, assess or recover a claim against the debtor that arose before the commencement of the case.

McCarthy, Johnson & Miller v. North Bay Plumbing, Inc. (In re Pettit), 217 F.3d *469 1072, 1077 (9th Cir.2000) (emphasis added, citations and internal quotations omitted). The automatic stay is designed to give the bankruptcy court an opportunity to harmonize the interests of both debtor and creditors while preserving the debtor’s assets for repayment and reorganization of his or her obligations. Id. In addition, “[s]ection 362(a) provides that all collection activities taken or suits brought against a debtor must cease when he or she files for bankruptcy.” Berg v. Good Samaritan Hospital (In re Berg), 230 F.3d 1165, 1167 (9th Cir.2000); see also Ramirez v. Fuselier (In re Ramirez), 183 B.R. 583, 591 (9th Cir. BAP 1995) (“Creditors and then-agents must immediately stop all collection and enforcement actions affecting the debtor or property of the estate. If there is any question about the applicability or scope of the stay, the creditors are required to come to the bankruptcy court to obtain clarification or relief from the stay.” (concurring opinion of J. Fenning, emphasis in original)).

If a debtor is represented by counsel, any creditor may communicate with counsel for the debtor without violating the automatic stay. Counsel has no need to be shielded from a client’s creditors. It is part of the job of counsel for a debtor to deal with the client’s creditors.

Section 362 provides for motions for relief from the automatic stay, and sets very tight time frames for the court to act on such a motions. However, in this case Associates never applied for relief from the automatic stay.

2. Notice to Associates of the Henrys’ Bankruptcy Filing

The court finds that Associates received notice of the debtors’ bankruptcy filing on several occasions prior to the February 23, 1998 date when Associates concedes that it knew of the filing.

First, Associates was listed on the creditor matrix under its prior name, Ford Consumer Finance. In consequence, on November 27, 1997 (Thanksgiving Day) the Bankruptcy Noticing Center in Arlington, Virginia mailed a notice of the filing to Associates, which presumably received the notice on approximately December 1, 1997.

Associates complains that the notice was not sent to its correct address. The notice was addressed to Ford Consumer Finance at 23046 Avenida Carlota, Suite 200, Lagu-na Hills, CA. While Associates’ main address was Suite 100 on Avenida de la Carlota, Suite 200 was part of its offices there. The difference between “Avenida Carlota” and “Avenida de la Carlota” is not significant, in the court’s judgment. 6

In addition, the return address on notices to creditors is counsel for the debtor (if the debtor is represented by counsel). The notice was not returned to debtors’ bankruptcy counsel. The court concludes that Associates received this notice.

Thus the presumption of receipt applies. See Moody v. Bucknum (In re Bucknum), 951 F.2d 204, 206-07 (9th Cir.1991). The presumption that notices were properly mailed and therefore received can only be rebutted by clear and convincing evidence that the mailing was not, in fact, accomplished. See id. at 207. The court finds that Associates has not presented evidence sufficient to overcome this presumption.

Second, on November 28, 1997 Vicki Henry went to Associates’ Torrance office to ■ make a payment on her mortgage. While at the office, she placed a telephone *470 call to an Associates collector to inform that office that she had made the payment. At the same time, she provided the information that the debtors had filed a bankruptcy case. Further, she advised Associates to contact the debtors’ bankruptcy attorney about the status of the home loan.

Third, in January, 1998 Vicki Henry spoke with a man in the collection department at Associates, who acknowledged that Associates was aware of the Henry bankruptcy case. This conversation took place on either January 21 or January 28 — Associates’ records show calls from her on both dates. Fourth, on February 4, 1998 Associates received a report from Trans-Union Credit Bureau that contained information about the debtors’ bankruptcy case. 7

Furthermore, Associates began talking with Mrs. Henry about an extension agreement on February 3, 1998, and these discussions continued through the month. According to Associates’ evidence, these agreements were only used for bankrupt debtors.

Thus Associates received notice of the Henry’s bankruptcy case within a few days of the filing, and repeatedly thereafter. However, Associates had no standard procedure for recording this information in its files so that it would be brought to the attention of an agent responsible for collecting an account.

3. Collection Actions by Associates

It is clear that Associates violated the automatic stay on numerous occasions in this case. Notwithstanding the notices received shortly after the Henrys filed their bankruptcy case, Associates attempted to contact the debtors or did contact them some 90 times over the next seven months about the debt. 8 Associates made telephone calls to the debtors both at home and at work, left telephone messages, threatened action if the debtors did not make payments, and sent delinquency letters. Most of the contacts were made or attempted by telephone. Approximately half of the contacts were attempted during the time that the automatic stay was in force, 9 and the remaining half occurred after the discharge injunction replaced the automatic stay. Even though the debtors were represented by counsel, apparently Associates made no attempt even once to contact their counsel. The volume of telephone calls alone compels a finding that Associates was harassing the debtors in violation of the automatic stay and the discharge injunction.

Apparently most of the attempted contacts were unsuccessful: Associates claims that its representatives actually talked to one of the debtors nine times during the automatic stay, and four more after the discharge injunction was issued. In consequence of Associates’ collection efforts, the debtors made six postpetition payments to Associates totaling more than $6000. 10

*471 4. Debtors’ Intentions

Associates contends that its contacts with debtors were justified, at least in part, as an effort to determine the debtors’ intentions with respect to the loan secured by a mortgage on their real estate. Where an individual debtor files a chapter 7 case and the schedules include a consumer debt secured by property of the debtor, § 521(2) gives the debtor 30 days to file “a statement of his intention with respect to the retention or surrender of such property and, if applicable, specifying that such property is claimed as exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm debts secured by such property.” In this case the debtors filed this statement with their chapter 7 petition.

Where a debtor files the statement of intention within the statutory period, there is no need for the secured creditor to contact the debtor to determine what the debtor’s intentions are with respect to the property. This is especially true where, as in this case, the statement is filed with the bankruptcy petition itself. The creditor can determine the debtor’s intentions from the papers filed with the court, and has no need to contact the debtor whatsoever on this subject. In this manner the creditor can avoid a violation of the automatic stay.

Associates’ personnel responsible for the collection of accounts testified repeatedly that they were trained to call debtors, after bankruptcy cases were filed, to find out their intentions with respect to property. This was highly inappropriate. Where a debtor has filed a statement of intentions, no such calls are necessary or appropriate: the court record gives all the information to which a creditor is entitled.

5. Creditor Contacts Where Debtor Intends to Make Payments

A secured creditor should be encouraged to send out payment coupons, envelopes and periodic statements if a debtor has filed a statement that the debtor plans to keep property subject to secured debt and to make payments. Debtors frequently complain to the court that they want to make their payments, but their creditors do not cooperate by providing payment coupons. Secured creditors hesitate to provide such cooperation for fear of violating the automatic stay or the discharge injunction.

Debtors frequently file bankruptcy cases to discharge their unsecured debt, but they want to keep property subject to secured debt, and to repay arrearages on the secured debt. Indeed, chapter 13 provides a variation on this theme: under a chapter 13 plan, the debtor repays arrearages on secured debt over the plan period (typically three to five years), and repays whatever the debtor can afford to pay (if anything) on the unsecured debts. Often a chapter 13 plan will provide for the cure of arrearages on secured debt and the maintenance of current payments, but nothing is left to pay unsecured creditors. See, e.g., In re Greer, 60 B.R. 547, 550-56 (Bankr.C.D.Cal.1986). Alternatively, a debtor may file a chapter 7 case to discharge unsecured debt, and then file a chapter 13 plan to deal with the secured debt. See In re Goeb, 675 F.2d 1386, 1388-90 (9th Cir.1982); Greer, 60 B.R. at 551-54. The secured creditor’s consent is not required — a chapter 13 plan is through and through a “cram-down” plan (it is *472 crammed down the throats of the uncon-senting creditors). 11

A third variation on this theme, chosen by the debtors in this case, is to file only a chapter 7 case. After discharging the unsecured debts, the debtor is then in position to work out a settlement with the secured creditor that enables the debtor to keep the debtor’s house. Often the debtor owes prepetition arrearages on the house, and needs to do a deal with the secured creditor to pay the arrearages. Unlike the chapter 13 route (with or without a prior chapter 7 case to discharge the unsecured debt), where the creditors’ consent is not required, this variation on the theme requires that the debtor arrange a deal with the secured creditor to pay the arrearages.

Where an individual consumer chapter 7 debtor’s statement of intention indicates that the debtor intends to make payments and to keep property that is subject to a lien, such as the mortgage 12 on the real estate in this case, the creditor may properly initiate certain contacts with the debtor. It is proper, for example, for the secured creditor to send monthly statements to the debtor after the bankruptcy filing, and payment coupons or other means to facilitate the making of monthly postpetition payments by the debtor. See Morgan Guaranty Trust Co. v. American Savings & Loan Ass’n, 804 F.2d 1487, 1491 (9th Cir.1986). If the promissory note has an adjustable interest rate 13 (as it did in this case), the creditor may properly give notice of changes in the interest rate.

If the debtor defaults in making postpetition payments, 14 the creditor may properly give notice thereof, and any other notices that are appropriate and customary in connection with lien enforcement action based on the postpetition default. 15 Further, if there are arrearages in payments at the time of filing, the creditor may properly contact the debtor to arrange for the payment or refinancing of the arrearages. 16 However, the creditor may not use a monthly statement to collect anything more than current payments. See In re Draper, 237 B.R. 502, 504-06 (Bankr.M.D.Fla.1999). In contrast, such conduct would violate the automatic stay for any unsecured debts, or any secured debts as to which the debtor does not *473 indicate in the Statement of Intention that the debtor intends to keep the property.

Proper communications in this context initiated by a creditor are limited to written communications. One benefit of a written communication is that it creates a record which permits the evaluation of whether the communication was proper, and did not stray into improper collection activities. 17

Throughout this process, the creditor may properly respond to any inquiries initiated by the debtor. Any communication that is initiated by the debtor is not a violation of the automatic stay or the discharge injunction, insofar as the creditor responds to the inquiry. If a debtor calls, the creditor is both entitled to take the call, and to call back if necessary to provide the information requested. However, the creditor should not use such a call as an occasion for collection activities.

Few of the 47 contacts that Associates made or attempted before the expiration of the automatic stay were justified on any of these grounds. The appropriate contacts included sending three billing statements and one telephone call concerning a check that failed to clear. Each of the remaining contacts, including all of the remaining telephone calls, violated the automatic stay.

B. Discharge Injunction Violations— § 524(a)(2)

The automatic stay in a bankruptcy case does not last indefinitely. In a chapter 7 case for an individual, the automatic stay terminates when a discharge is granted or denied. In this case the discharge was granted on March 9, 1998. Upon the grant of a discharge, the automatic stay is replaced with the discharge injunction provided by § 524(a).

The discharge injunction provision relevant to this case is § 524(a)(2), which provides that a bankruptcy discharge “operates as an injunction against ... an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived .... ” See Molloy v. Primus Automotive Fin. Servs., 247 B.R. 804, 815 (C.D.Cal.2000).

The discharge injunction is permanent. It survives the bankruptcy case, and applies forever with respect to every debt that is discharged. Again, the Senate Report explains the impact of the injunction:

The injunction is to give complete effect to the discharge and to eliminate any doubt concerning the effect of the discharge as a total prohibition on debt collection efforts. This paragraph ... coverfs] any act to collect, such as dunning by telephone or letter, or indirectly through friends, relatives, or employers, harassment, threats of repossession and the like.

S. Rep. No. 95-989, at 182-83 (1979). The permanency of the discharge injunction contrasts with the temporary character of the automatic stay.

*474 At the same time, the discharge injunction is narrower than the automatic stay in a material way for this litigation. While the automatic stay prohibits essentially all creditor collection activities absent court order, the discharge injunction is more selective.

Although the discharge eliminates a debt as a personal liability, it does not affect a lien that provides security for the debt. See § 522(c)(2). Indeed, the law has been settled since 1886 that a discharge in a liquidation bankruptcy case (a chapter 7 case under present law) does not discharge a lien against real or personal property: liens survive or pass through bankruptcy unaffected. See, e.g., Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S.Ct. 2150, 2153, 115 L.Ed.2d 66 (1991); Long v. Bullard, 117 U.S. 617, 620, 6 S.Ct. 917, 918, 29 L.Ed. 1004 (1886). 18 The Supreme Court expressed the principle as follows in Johnson: “Notwithstanding the discharge, the [secured creditor]’s right to proceed against [the debtor] in rem survived the Chapter 7 liquidation.” 501 U.S. at 80, 111 S.Ct. 2150.

Johnson dealt with the question of whether -a debtor can reorganize a secured debt under chapter 13 after having discharged it in a chapter 7 case. As a prelude to answering this question, the Supreme Court described the nature of the security interest that survives a chapter 7 liquidation as follows:

A mortgage is an interest in real property that secures a creditor’s right to repayment. But unless the debtor and creditor have provided otherwise, the creditor ordinarily is not limited to foreclosure on the mortgaged property should the debtor default on his obligation; rather, the creditor may in addition sue to establish the debtor’s in per-sonam liability for any deficiency on the debt and may enforce any judgment against the debtor’s assets generally. A defaulting debtor can protect himself from personal liability by obtaining a discharge in a Chapter 7 liquidation. However, such a discharge extinguishes only the personal liability of the debtor. Codifying the rule of Long v. Bullard, the Code provides that a creditor’s right to foreclose on the mortgage survives or passes through the bankruptcy.

Id. at 83, 111 S.Ct. 2150 (citations omitted); cf. Cox v. Zale Delaware, Inc., 239 F.3d 910, 914 (7th Cir.2001) (the effect of rescinding a reaffirmation agreement as to a secured debt is that the debt is discharged but the creditor retains its security interest). A chapter 7 discharge extinguishes only one mode of enforcing a claim, an action in personam against the debtor. It leaves intact the right to proceed in rem against the property. Johnson, 501 U.S. at 84, 111 S.Ct. 2150.

This difference is reflected in the statutory scope of the automatic stay and the discharge injunction. While the automatic stay prohibits any act to enforce a lien against property of the estate, there is no comparable provision in the discharge injunction. Thus the bankruptcy discharge eliminates the personal liability of the debtors on the debt, and converts the loan into a non-recourse loan. See id. at 86-87, 111 S.Ct. 2150. However, the lien on the property remains, and the creditor may proceed to enforce the lien, to the extent authorized by state law, once the *475 automatic stay terminates (whether by operation of law or by order of the court).

A non-recourse loan is a well-known situation in real property law. In practical terms, whether a purchaser of encumbered property assumes a loan or not is of little consequence under California Law: if the purchaser fails to make the loan payments (notwithstanding the lack of assumption), the creditor is entitled to proceed with foreclosure.

If the debtor wants to make the payments and keep the property, the creditor is entitled to take the same steps to facilitate this arrangement as under the automatic stay (see supra) without violating § 524. The creditor may accept payments until (a) the debtor notifies that the debtor no longer desires to make the periodic payments, (b) the obligation is paid in full, or (c) the debtor ceases to own the property.

If the debtor thereafter defaults, the secured creditor is entitled to enforce its lien by foreclosing on the property, and may give all notices to the debtor authorized by state foreclosure law. The creditor may also give written notice to the debtor that it is planning to proceed with foreclosure because of the post-discharge default. 19

Section 524 provides an exception to the discharge injunction for any debt that is reaffirmed pursuant to the procedure provided in that section. The reaffirmation of a debt restores the rights of the creditors in full, and permits enforcement of the debt in case of any post-reaffirmation default. In this case the debtors did not reaffirm the debt owing to Associates. Thus the discharge prohibited Associates from undertaking any debt collection actions thereafter, except to enforce its lien (which was not discharged).

C. Reaffirmation of Mortgage Debt

Section 524(c)-(e) provides for the reaffirmation of dischargeable debts in certain circumstances. A reaffirmation of a debt is a purely voluntary act by a debtor, and is not required by any law. See Bankruptcy Code § 524(c)(2)(B); Rein v. Providian Financial Corp., 252 F.3d 1095, 1098 (9th Cir.2001); see generally In re Kamps, 217 B.R. 836, 840-42 (Bankr. C.D.Cal.1998) (discussing nature of reaffirmation agreement) and cases cited therein. The circuits are split, however, on the consequences of the failure to reaffirm a secured debt.

The disagreement turns on the interpretation of the language of § 521(2). This subsection provides:

if an individual debtor’s schedule of assets and liabilities includes consumer debts which are secured by property of the estate—

(A) within thirty days after the date of the filing of a petition under chapter 7 of this title or on or before the date of the meeting of creditors, whichever is earlier, ... the debtor shall file with the clerk a statement of his intention with respect to the retention or surrender of such property and, if applicable, specifying that such property is claimed as exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm debts secured by such property;

(B) within forty-five days after the filing of a notice of intent under this section, or within such additional time as *476 the court, for cause, within such forty-five day period fixes, the debtor shall perform his intention with respect to such property, as specified by subpara-graph (A) of this paragraph; and

(C) nothing in subparagraphs (A) and (B) of this paragraph shall alter the debtor’s or the trustee’s rights with regard to such property under this title

Under § 521(2)(A), an individual debtor is required to file a statement of intention, within 30 days of filing a chapter 7 petition, with respect to any consumer debt secured by property of the estate. The debtors in this case filed this statement with their petition, and in it they stated that they intended to retain their house.

The circuits are divided as to the meaning of the remainder of § 521(2)(A). Four circuits (the First, Fifth, Seventh, and Eleventh) have held that, once the debtor decides to retain rather than surrender the property, the debtor must choose one of three options: (1) claim the property as exempt, (2) redeem the property, or (3) reaffirm the debt secured by the property. See Bank of Boston v. Burr (In re Burr), 160 F.3d 843, 845-49 (1st Cir.1998); Johnson v. Sun Fin. Co. (In re Johnson), 89 F.3d 249, 252 (5th Cir.1996) (per curiam ); Taylor v. AGE Fed. Credit Union (In re Taylor), 3 F.3d 1512, 1516 (11th Cir.1993); In re Edwards, 901 F.2d 1383, 1387 (7th Cir.1990).

In contrast, the Second, Fourth and Tenth circuits hold that a debtor may choose one (or more) of these options “if applicable.” However, under the case law of these circuits, a debtor who is current on loan payments on secured property may retain the property and make the payments specified in the contract with the creditor without choosing any of these options. Capital Communications Fed. Credit Union v. Boodrow (In re Boodrow), 126 F.3d 43, 53 (2d Cir.1997); Home Owners Funding Corp. v. Belanger (In re Belanger ), 962 F.2d 345, 347 (4th Cir.1992); Lowry Fed. Credit Union v. West, 882 F.2d 1543, 1547 (10th Cir.1989).

In McClellan v. Parker (In re Parker), 139 F.3d 668 (9th Cir.1998), the Ninth Circuit joined the Second, Fourth and Tenth Circuits in holding that a debtor may choose to keep the property and make the payments required by the contract with the creditor. In the Ninth Circuit’s view, § 521(2)(C) preserves options for a debtor apart from those specified in § 521(2)(A), which include keeping the property and making the payments on the debt secured thereby. See id. at 673. In Parker the Ninth Circuit found that the bankruptcy court had discretion to refuse approval of a reaffirmation of a debt secured by the debtor’s automobile as not in the debtor’s best interest. See id. Ninth Circuit law thus permits a bankruptcy judge to deny a debtor permission to reaffirm a secured debt, even where the debt- or attempts a reaffirmation, after the debt- or chooses to keep the property and make the payments. 20 Perforce, a debtor may make this decision without violating bankruptcy law.

Because in Parker the Ninth Circuit approved the option, exercised by the debtors in this case, of retaining property subject to a security interest and making the payments on the secured debt without reaffirming the debt, the court finds that the debtors did not circumvent the provisions of § 524(c), deliberately or otherwise.

*477 D. Civil Contempt

There are at least two different grounds for imposing sanctions for the violation of § 362(a) and 524(a). First, both §§ 362(a) and 524(a) operate as injunctions against creditors, and a violation of either provision is punishable as contempt of court. Second, § 362(h) provides a separate statutory basis for imposing sanctions in appropriate eases. Third, there may be a private right of action for violation of the discharge injunction under § 524.

1. Contempt

A bankruptcy court may award damages for a violation of the automatic stay or the discharge injunction under the court’s contempt power. State Bd. of Equalization v. Taxel (In re Del Mission Ltd.), 98 F.3d 1147, 1152 (9th Cir.1996) (automatic stay). Under Ninth Circuit law, such an award is supported by § 105, which authorizes a bankruptcy court to issue “any order ... that is necessary or appropriate to carry out the provisions of this title.” Id.

Damages are a recognized sanction for contempt. See, e.g., Costa v. Welch (In re Costa), 172 B.R. 954, 963 (Bankr.E.D.Cal.1994) (§ 524 case). The purpose of sanctions for civil contempt is to compensate the opposing party for the injuries which arise from the contempt. Computer Communications, Inc. v. Codex Corp. (In re Computer Communications, Inc.), 824 F.2d 725, 731 (9th Cir.1987); Crystal Palace Gambling Hall, Inc