The Indiana Court of Appeals ruled on an issue of first impression in Green Tree Servicing, LLC v. Brough, 930 N.E.2d 1238 (Ind. Ct. App. 2010) that arbitration provisions in consumer loan agreements survive discharge in the borrower’s bankruptcy proceeding.
The facts of the case are as follows. On August 25, 2000, Appellee Brian D. Brough and a predecessor in interest to Green Tree executed a “Retail Installment Contract, Security Agreement, Waiver of Trial by Jury, and Agreement to Arbitration or Reference or Trial by Judge Alone” (the “Contract”). Pursuant to the Contract, Green Tree’s predecessor loaned Brough $24,483.48 to purchase a mobile home. After Brough defaulted on the loan, he filed a Chapter 13 bankruptcy petition that was converted to a Chapter 7 proceeding. Brough’s debt under the Contract was discharged in the bankruptcy. Thereafter, Green Tree instituted a lawsuit against Brough in Indiana state court, and Brough filed a counterclaim under the Fair Credit Reporting Act, alleging that Green Tree improperly reported to credit agencies that Brough owed Green Tree a debt under the Contract despite his discharge. Relying on authority from Texas and the Ninth Circuit, the appellate court held “that Brough’s contractual obligation to arbitrate his FCRA claim against Green Tree was not invalidated by his bankruptcy discharge.” Id. at 1243.