Supreme Court Will Hear Case About Bankruptcy and Fair Debt Collection Practices Act

If you are a resident of the Chicago area who has been harassed by debt collector about an old debt, it is important to pay attention to a recent case that will soon go before the U.S. Supreme Court. According to a recent article in The Wall Street Journal, “the U.S. Supreme Court will decide whether a debt-collection agency can be punished for trying to collect an old credit-card debt from a woman who filed for bankruptcy.”
In short, if you file for bankruptcy protection, can a debt collector continue trying to collect on an old debt? If that debt collection is in fact prohibited under the Fair Debt Collection Practices Act (FDCPA), can the debt collector be punished?
Supreme Court Grants Writ of Certiorari
In order for the U.S. Supreme Court to hear a case, a petitioner first must file a petition for a writ of certiorari. According to a definition from the Cornell Legal Information Institute (LII), a writ of certiorari is a type of writ “by which an appellate court decides to review a case at its discretion.” At the LII definition clarifies, a writ of certiorari is how the U.S. Supreme Court typically picks the cases that it will hear.
In the present case, the debt collection company Midland Funding LLC filed a petition for a writ of certiorari following a lower court decision holding the company accountable for penalties after it attempted “to collect payment on years-old credit-card debt from a person who had sought bankruptcy protection.” The Supreme Court granted Midland Funding LLC’s petition, and as such, the Supreme Court will hear the case.
Conflict Between the Bankruptcy Code and the Fair Debt Collection Practices Act
In agreeing to hear the case of Midland v. Aleida Johnson, commentators emphasize that the Supreme Court has acknowledged that there may be a conflict between the bankruptcy code and the FDCPA. As the article explains, Midland Funding LLC is arguing that “the bankruptcy code precludes the FDCPA, and therefore it shouldn’t face penalties.” To clarify, the bankruptcy code creates a system through which creditors shall be repaid through bankruptcy proceedings, while the FDCPA limits a debt collector’s ability to collect on certain debts and in specific manners.
If the bankruptcy code—which comes into play when a debtor files for bankruptcy protection—permits creditors to be repaid in certain ways, does the FDCPA continue to protect consumers who have filed for personal bankruptcy from debt collection companies’ efforts to collect on old debts?
How Bankruptcy Proceedings Can Be Different
As the article explains, the case will not impact corporate bankruptcy cases. However, its outcome likely will affect both creditors and debtors in consumer bankruptcy cases. Currently, in bankruptcy proceedings, there is a presumption for creditors’ claims unless the debtor specifically objects. However, when bankruptcy proceedings are not underway, a creditor seeking to recoup money from an old debt must provide evidence that the claim is valid.
Why is bankruptcy court different? Usually, debtors are facing many claims—not usually just one—and as a result more creditors may be able to get their claims through. In the present case, the debtor objected to Midland Funding LLC’s claim, and that is how a district court determined that Midland’s debt collection attempts were in violation of the FDCPA. Yet the district court ruled that “the bankruptcy code precluded the debt-collection law,” and as such, Midland Funding LLC could not be subject to punishment. The U.S. Court of Appeals for the Eleventh Circuit also found that Midland violated the FDCPA, but it ruled that the bankruptcy code does not preclude the FDCPA.
We will need to wait and see how the U.S. Supreme Court decides. In the meantime, if you have questions about filing for personal bankruptcy, an Oak Park bankruptcy attorney can help. Contact the Emerson Law Firm today for more information.
See Related Blog Posts:

Comments

Post a Comment

Popular posts from this blog

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more