Todd Christenson filed for chapter 7 bankruptcy in November 2010. In February 2011, a federal bankruptcy court in Minnesota discharged Christenson’s debts and, later the same year, closed the case. But almost 15 years later, the county Sheriff sold Christenson’s home due to unpaid pre-petition debt.
The creditor, Steven Breitenfeldt, had filed an adversary proceeding in Christenson’s chapter 7 case seeking a ruling that the pre-petition debt was not dischargeable. Breitenfeldt and Christenson reached an out-of-court settlement, and Christenson signed a confession of judgment in the event he defaulted. See Christenson v. Breitenfeldt (In re Christenson), 24-br-4033, 2025 WL 315094, at *2 (Bankr. D. Minn. Jan. 27, 2025).
The August 2011 settlement agreement provided that “Defendant joins the Plaintiff in asking the Bankruptcy Court to enter an order approving this agreement.” Significantly, however, the parties never submitted the settlement agreement to the bankruptcy court for approval.
In September 2011, the court dismissed the adversary proceeding without prejudice, ordering that it would retain jurisdiction if “the parties wish to submit and file a stipulation or stipulated form of final judgment to complete a settlement.” Id. In October 2011, the bankruptcy court closed Christenson’s chapter 7 case even though the parties never submitted their settlement agreement to the court and without any finding regarding non-dischargeability.
In 2013, after Christenson defaulted on his obligations under the settlement agreement, Breitenfeldt filed the confession of judgment in Minnesota state court. Ten years later, in January 2023, Breitenfeldt filed an action to renew the confession of judgment and, in March 2023, a Minnesota state court formally issued the judgment. Via Minnesota state law, the judgment attached to Christenson’s home. In September 2023, the Crow Wing County Sheriff’s Office issued a notice of execution of sale, scheduled for April 2024.
The month before the scheduled sale, Christenson reopened his chapter 7 case and filed an adversary complaint against Breitenfeldt. Christenson alleged Breitenfeldt violated Bankruptcy Code section 105(a) due to the lien Breitenfeldt had attached to Christenson’s property as collateral for the pre-petition debt. Breitenfeldt filed a counterclaim for slander of title. After a preliminary hearing, the bankruptcy court found against Christenson and allowed the Sheriff’s sale to go through in April 2024.
In November 2024, U.S. Bankruptcy Judge Michael E. Ridgway replaced the then-presiding judge, Kesha L. Tanabe, for reasons apparently unrelated to the case. Despite Judge Tanabe’s preliminary ruling allowing the sale, Judge Ridgway ruled against Breitenfeldt on summary judgment because the 2011 settlement declaring the debt nondischargeable had never been approved by the court. Relying on a similar case from the U.S. Bankruptcy Court for the District of New Jersey, Judge Ridgway reasoned as follows:
- Under 11 U.S.C § 727(b), a chapter 7 debtor is discharged from all debts that arose prior to the filing date, except for 18 enumerated categories.
- Fifteen of the 18 categories are self-effectuating, but a creditor who wants a debt deemed nondischargeable under section 523(a)(2), (4), or (6), must file a complaint and have the court determine the dischargeability of such debt.
- In 2010, Breitenfeldt commenced such an adversary proceeding seeking a determination that his pre-petition unsecured debt was nondischargeable. The parties settled the adversary proceeding via an extra-judicial agreement. Breitenfeldt did not obtain a court determination of nondischargeability; instead, the parties merely notified the court of the settlement.
- Because the court must determine that debt is nondischargeable under section 523(a)(2), (4), or (6), and the court made no such determination, Breitenfeldt’s actions would “usurp the Bankruptcy Code by simply crafting a post-petition extra-judicial agreement without approval of the Bankruptcy Court.”
The court thus rejected Breitenfeldt’s position that the settlement agreement remained enforceable despite the discharge of Breitenfeldt’s debt. Id. (citing In re Craytor, 650 B.R. 470 (Bankr. D. N.J., 2023)).
Next, the court addressed whether Breitenfeldt’s actions to collect on the debt violated the discharge entered by the bankruptcy court in 2011. A discharge “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor.” 11 U.S.C. § 524(a)(2). Breitenfeldt “[a]ttempted to collect on an unenforceable agreement that purports to allow [him] to enforce a portion of the pre-petition debt.” Accordingly, the court ruled that he violated the injunction effectuated by the bankruptcy discharge.
As a result, he granted summary judgment in Christenson’s favor. It reserved for later determination the appropriate remedy.
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Add Christenson to the list of recent cases providing object lessons to bankruptcy practitioners: be careful to ensure that any side agreements are actually enforceable post-discharge before dropping adversary proceedings.
