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• Is it appropriate for a creditor to persuade church elders to excommunicate a church member who declared bankruptcy? No, ruled a federal appeals court. A church member filed a bankruptcy petition, resulting in a court order prohibiting any attempts by any creditors to collect their debts against him. One creditor contacted the member's church elders and attempted to persuade them to excommunicate the member for filing the bankruptcy petition (which the creditor claimed to be unscriptural conduct). The debtor sued the creditor for violating the court's prohibition of any effort to collect the debt, and the court awarded punitive damages to the church member. Federal law permits a bankrupt debtor to sue creditors who violate such court orders, and punitive damages may be awarded in appropriate circumstances. The court had "no trouble" in awarding punitive damages against the creditor ...

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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  • March 1, 1990