Attorney Travis Starr of Hot Springs said his client was fired from a subsidiary of Arvest Bank because the employee filed for Chapter 13 bankruptcy protection.
David Dwelle said he had two choices back in 2012: either pay the $1,800 he had charged on a credit card issued by Arvest Bank or be fired from his job at an Arvest subsidiary.
But Dwelle, of Arkadelphia, couldn’t pay the bill because he was in the middle of a Chapter 13 bankruptcy reorganization. As a result of not paying, Dwelle was fired from his job at Arvest’s Central Mortgage Co., according to his bankruptcy attorney, Travis Starr of Hot Springs.
Starr has sued Arvest, Central Mortgage and Security Bankcard Center Inc., the credit card company owned by Arvest, in U.S. Bankruptcy Court for violating a section of the bankruptcy code which prevents an employer from terminating an employee for filing for bankruptcy.
The case pulls back a curtain on employment policies at Arkansas’ largest bank, including its attitude toward debt. It also shines a light on a section of the bankruptcy code that governs relationships with employers but rarely makes it to court.
Arvest denied allegations of wrongdoing in its court filing. Arvest spokesman Jason Kincy said he couldn’t comment on pending litigation. And attorney John Calhoun Jr., of North Little Rock, who represents Arvest and the other defendants, didn’t return a call for comment.
The case, in which Starr is seeking millions in damages, was heard during a three-day trial that started March 25 in front of U.S. Bankruptcy Court Judge Ben Barry. A ruling is pending.
Arvest maintains Arkansas’ oldest bank charter and had nearly 6,000 employees at the end of 2014. It also reported total assets of $14.9 billion at the end of 2014, up 6.1 percent from the previous year.
Tara Twomey, an attorney with the National Consumer Law Center of Washington, said the bankruptcy code is pretty clear: “You can’t terminate employment of a debtor solely because the debtor is in bankruptcy or because they haven’t paid a debt that’s dischargeable in bankruptcy.”
She said there aren’t many cases brought that alleged violation of the 525 section of the bankruptcy code.
“The ways employers have gotten around this prohibition is to find some other reason why the debtor was fired,” Twomey said.
John Pottow, a bankruptcy and commercial law professor at the University of Michigan Law School, said the purpose of the 525 statute is to help people who have filed for bankruptcy protection.
“If you said well the employer is allowed to fire them if they happen to have some outstanding debt, that would defeat the whole purpose of the statute,” Pottow said.
Working for Arvest
Dwelle started working at Central Mortgage as a temporary foreclosure coordinator in August 2009. He became a permanent employee at the end of 2009 and was making $14 an hour.
One of the benefits of working for Central Mortgage was being offered an Arvest consumer credit card, according to the lawsuit. But in the company’s employee handbook, Arvest warns that proper use of credit is required to work at the firm.
“We expect you to use restraint in your borrowing and to live within the limits of your family income,” the handbook, which was included in Dwelle’s complaint.
In addition, Arvest also requires its employees to repay its debts to the company. “Failure to comply with this policy for any reason whatsoever will result in termination of employment,” the handbook said.
Arvest also had a monitoring program in place in order “to assist associates who may need financial guidance before the problem grows beyond their ability to handle it,” the handbook said.
Banking attorney Jane Shea, of Frost Brown Todd LLC of Cincinnati, told Arkansas Business that she didn’t have a problem with banks monitoring an employee’s credit.
“If an employee is concerned about their solvency, then not only does it distract from the quality of their work, but in some cases an employee position might be such that they could embezzle,” Shea said.
But in 2012, Dwelle’s debts were piling up. He feared a trip to bankruptcy court would cost him his job though.
Dwelle contacted Arvest’s human resources administrator, Cheryl Currey, about how he should handle his pending bankruptcy.
“The handbook explains that associates have an obligation to honor all of his or her credit obligations,” she said in a March 16, 2012, email that was included as an exhibit in the complaint. “No Arvest debt (loan/credit cards/ mortgages… ) can be included in the bankruptcy without reaffirming the debt. If there is Arvest debt and it is including [sic] in the filing and not reaffirmed, it will be cause for termination.”
She also told Dwelle that if he had filed for bankruptcy, Arvest wanted proof that its debt wasn’t included in the bankruptcy or had been reaffirmed and that payments were being made.
“Have a good weekend!” Currey concluded the email.
Twomey, the attorney with the National Consumer Law Center, said an attorney would never recommend reaffirming an unsecured debt in bankruptcy. Reaffirming the debt would mean the debtor would continue making payments as if the bankruptcy didn’t exist, but usually there is an asset tied to the loan that is reaffirmed.
Starr told Arkansas Business that in Dwelle’s case, there wasn’t a mechanism to reaffirm the debt even if he wanted to do that.
Filing Bankruptcy
Dwelle and his wife, Kayla, filed for Chapter 13 on April 30, 2012. He listed $278,280 in debts and $192,357 in assets. About $100,000 worth of the debts were to creditors holding unsecured debts.
Dwelle said he didn’t include the Arvest debt in the bankruptcy in the initial filing because of “the insane amount of pressure and stress I was receiving from my employer and the Arvest credit card manufacturing and servicing company to either pay them under the table or ‘reaffirm’ the debt somehow, or risk losing my job,” according to his complaint.
Dwelle continued paying the Arvest debt, though, “under the table and outside the view and knowledge of the” bankruptcy trustee and the bankruptcy court, Starr said in the filing.
In an interview with Arkansas Business, Starr said that Dwelle couldn’t legally make that decision to pay the Arvest debt outside of the bankruptcy proceeding. The bankruptcy trustee handles the payments to creditors.
“He can go to jail,” Starr said, for making that decision.
So Dwelle amended his bankruptcy schedules to include the credit card debt and that set him on a path to being dismissed from Central Mortgage.
In June 2012, Dwelle received an email from Trudy Newsom, the collection manager for Security Bankcard Center “reiterating the same ultimatum, pressure, discouragement, stress, and collection activity as was conveyed by Cheryl Currey,” Starr said in the filing.
“Once you have talked this over with your attorney and decide how you will be moving forward (reaff or paying outside the plan), please let me know if you will need a reaffirmation,” Newsome said in the email, which is attached as an exhibit to the complaint.
The debt wasn’t reaffirmed.
Firing
Dwelle was called into an office at Central Mortgage on Oct. 16, 2012, and was fired.
“The only reason given for the termination … was Mr. Dwelle had stopped paying his credit card debt,” the complaint said.
Starr told Arkansas Business that “I guess [Arvest] felt like they applied their rule to everybody equally that that somehow made it not wrong or not a breach of duty under [bankruptcy section] 525.”
Dwelle also argued to the Arvest officials that he wasn’t allowed to pay his credit card debt under the table and that he couldn’t reaffirm the debt. But those arguments “were to no avail and fell on deaf ears,” Starr said in the filing.
In 2013, Dwelle got a job working for Pharmacy Care of Arkansas LLC in Arkadelphia. Starr said he wasn’t sure when Judge Barry would issue his ruling on the case.
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