The debt buyers won this round. On May 15, 2017 the U.S. Supreme Court ruled in Midland Funding v. Johnson that it is not a violation of the Fair Debt Collection Practices Act (FDCPA) for a debt buyer or creditor to file a proof of claim for a time-barred debt in bankruptcy court.

It's really an odd decision to me, because it IS a violation for a creditor or debt buyer to sue a consumer for a time-barred debt. Filing a proof of claim is very similar to filing a lawsuit.

In the few days since the decision came down, I am already seeing proofs of claim being filed in our west Houston bankruptcy law office's chapter 13 cases for old, stale claims that are not otherwise legally enforceable.

That means we will either have to allow these claims to receive payment, or file objections to each and every one. Thiw will be at great time and expense for us and potentially also the courts and our clients. I only hope that someday the U.S. Congress acts and makes it an explicit violation of the FDCPA for debt buyers and creditors to file stale debts as proofs of claim in bankruptcy cases.

The way it is now, these debt buyers will likely be receiving millions of dollars in payments from chapter 13 trustees, to which they are not legally entitled. Or the bankruptcy system will have to spend millions of dollars in time and expense to keep them from it. What is the sense of that? Go figure.

What do you think about this Supreme Court opinion? Do you think it is good or bad? Have you had an experience with a really old debt trying to collect? Leave your comments and opinions below.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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