Bankruptcy filings impact debt collectors. When a consumer seeks protection under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, debt collectors are typically notified of the bankruptcy filing. They should not continue to try and collect a debt while the consumer is in bankruptcy.
Courts differ on whether contact with the consumer during bankruptcy is just a violation of the bankruptcy stay or if it also means the debt collector violates the Fair Debt Collection Practices Act, 15 U.S.C. 1692 (“FDCPA”). Also unclear was whether a debt collector could try and collect in bankruptcy – by filing a proof of claim – if the debt was too old. A new court decision helps consumers by confirming debt collectors may violate the FDCPA when they file bankruptcy proofs of claim on time-barred debts. These time-barred debts are too old to sue on and therefore, consumers have the right to file claims under the FDCPA when this happens.
The Eleventh Circuit Court of Appeals stated, “Although the Code certainly allows all creditors to file proofs of claim in bankruptcy cases, the Code does not at the same time protect those creditors from all liability. A particular subset of creditors – debt collectors – may be liable under the FDCPA for bankruptcy filings they know to be time-barred.” This May 24, 2016 ruling was in the consolidated cases of Johnson v. Midland Funding, LLC and Brock v. Resurgent Capital Services, L.P. and LVNV Funding, LLC, Nos. 15-11240 and 15-14116.
Because it’s unlawful to make false, deceptive or misleading representations when collecting a debt, it should also be unlawful for debt collectors to make bankruptcy filings that misrepresent the age or ability to sue on a particular debt. This decision makes good sense for consumers and helps keep collectors honest.
If you filed bankruptcy and have questions about debt collection in bankruptcy, talk to your bankruptcy attorney or turn to a consumer protection attorney for help.