U.S. Supreme Court: Stale bankrupt claims not FDCPA violation

J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
Posted on May 23, 2017

Well, 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 odd decision to me, because it IS a violation for a creditor or debt buyer to sue a consumer for a time-barred debt. 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 be receiving millions of dollars in payments from chapter 13 trustees, to which they are not legally entitled. Go figure.

 

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