The Supreme Court will decide whether the fine print in a credit card contract can pull a bank’s fight with two bankrupt borrowers out of bankruptcy court and into a private hearing.
Story Snapshot
- On Friday, November 6, the Supreme Court agreed to hear Goldman Sachs Bank USA v. Brown.
- Two cardholders say Goldman kept chasing card debts after they filed for bankruptcy, when the law says collection must stop.
- Goldman says their claims belong in arbitration, a private process, because their card agreements say so.
- Three lower courts kept the case with the bankruptcy judge, and Goldman says that ruling puts many card contracts at risk.
What the Supreme Court Agreed To Decide
The justices took the case to settle a split between federal appeals courts. In 2006, the appeals court based in New York sent a similar claim to arbitration. In March 2026, the appeals court based in Richmond, Virginia, went the other way. The question is whether a bankruptcy judge may refuse to send a case to arbitration when arbitration would clash with the purposes of bankruptcy law.
Arbitration means a dispute is decided by a private referee, called an arbitrator, instead of a judge. It usually happens outside a public courtroom, and the chance to appeal is limited. Many credit card contracts include a clause that says disputes must go this way.
What the Cardholders Say Happened
Rhea Brown filed for bankruptcy in June 2023, and Gregory Maze filed in November 2023. Both listed credit card debts owed to Goldman. Filing for bankruptcy sets off what is called the automatic stay, a court order that bars lenders from trying to collect while the case goes on. According to court records, Goldman got notice of both filings within days.
Brown says Goldman kept contacting her for more than six months after she told the bank about the stay. Maze says the contacts went on for more than three months. The two sued Goldman inside their bankruptcy case under a part of bankruptcy law that lets people seek damages when a lender willfully breaks the stay. They also asked to represent other cardholders in a class action.
In September, the bankruptcy judge dismissed their complaint because it did not show enough actual money harm, but let them file it again. According to a filing by the cardholders, the same judge said there can be “little debate” that Goldman willfully violated the stay.
Why Goldman Wants the Case Moved
Goldman pointed to the arbitration clauses in the card agreements and asked the bankruptcy court to pause the case and send it to an arbitrator. The bank says a federal law, the Federal Arbitration Act, tells courts to enforce those clauses. In its appeal, Goldman called the stakes “enormous,” because arbitration clauses are common in consumer credit agreements and the lower court ruling puts the enforceability of many of them at risk.
The bankruptcy judge in Virginia said no. A federal district judge agreed, and so did the appeals court in a 2-1 vote. Judge Paul Niemeyer wrote that arbitration “would interfere and conflict with the strong and established policies and purposes of the Bankruptcy Code.” He called the automatic stay “one of the fundamental debtor protections provided by the bankruptcy laws.” Judge Robert King disagreed and said the claims “belong in arbitration, not an adversary proceeding before the bankruptcy court.” An adversary proceeding is a separate lawsuit filed inside a bankruptcy case.
What This Means for People With Credit Cards
The arbitration clause in a card agreement can decide where a fight with the bank is heard. If Goldman wins, a cardholder in bankruptcy who says a lender kept calling could be sent to a private arbitrator instead of the judge who oversees the case. If the cardholders win, those claims can stay with that judge, who already knows the case.
The cardholders’ lawyers say the case is about a court’s power to enforce its own order. According to their filing, Goldman agrees that a bankruptcy judge can still punish stay violations through contempt, a court’s power to sanction anyone who defies its orders. The fight is over the separate damages claim that the law gives to the borrower.
What Comes Next
The justices discussed Goldman’s request at four conferences in a row before granting it. Arguments are likely in 2027, with a decision expected by late June or early July 2027.
Sources:
reuters.com, scotusblog.com, govinfo.gov, supremecourt.gov, supremecourt.gov, vawb.uscourts.gov
