Supreme Court Hears Arguments in Midland Funding v. Johnson

Back in October, we discussed how the U.S. Supreme Court had agreed to hear a case concerning debt collection companies that attempt to collect on old debt from consumers who have sought bankruptcy protection. In the case of Midland Funding v. Johnson, the Supreme Court will decide whether a debt collector can be punished for attempting to collect on old debt after the debtor has filed for personal bankruptcy. That case is now before the Supreme Court, and the justices have begun hearing arguments in the case. According to a recent article in Forbes, Justice Sonia Sotomayor’s reactions to arguments from Midland Funding make clear her position on companies like Midland Funding that buy old debts and later try to collect them.
If Justice Sotomayor finds against Midland Funding, how will the Court ultimately rule? How do Justice Sotomayor’s reactions during oral arguments give us some potential clues into the Court’s thinking about the case?
Sotomayor Questions Counsel for Midland Funding
As the article explains, in recent oral arguments in Midland Funding v. Johnson, “Justice Sonia Sotomayor made no secret of her contempt for the companies that buy old, often uncollectable debts and file claims with bankruptcy courts in hopes of getting paid anyway.” During oral arguments, “Sotomayor repeatedly asked the lawyer for Midland Funding why it should not face legal sanctions for trying to collect on debts that are clearly barred by the statute of limitations.
To give you a brief reminder about the background of this case, Midland Funding purchased old debts and then, when the debtor filed for consumer bankruptcy, Midland filed a claim with the bankruptcy court in an attempt to collect on that debt. The debtor argues that the Fair Debt Collection Practices Act (FDCPA) allows for penalties to be assessed against Midland Funding for such actions, while Midland contends that the Bankruptcy Code precludes the terms of the FDCPA. Given the significant legal question at issue, the Supreme Court agreed to hear the case.
In its function as a debt collector, Midland Funding has collected “more than $800 million on consumer debts.” Many of the debts it attempts to collect are those that it has purchased “for pennies on the dollar” from creditors who were unable to collect from the consumer for a variety of reasons, among them personal bankruptcy. In questioning the role of Midland Funding, Sotomayor said, “I’m sorry. I’m having a great deal of difficulty with this business model. Completely.”
Supreme Court Could Find in Favor of Midland Funding
While Sotomayor’s position on the practices of companies like Midland Funding seems to be clear, other justices on the court have focused on the legal issue of whether the Bankruptcy Code should preclude a claim under the FDCPA. Specifically, as the article explains, “other justices had a problem with using the federal Fair Debt Collection Practices Act . . . to intrude on how bankruptcy judges administer their cases.” Both Justice Breyer and Chief Justice Roberts have indicated their wariness “about allowing debtors to bring FDCPA cases in Article III courts, which handle civil cases, over how their creditors present claims to a bankruptcy court.”
If the Court splits in a 4-4 decision, the most recent judgment against Midland Funding will be upheld until the Supreme Court agrees to hear a case on the issue again. With only eight justices on the Court, there is a possibility that there will be no definitive ruling. However, if a majority of the Court comes to the same conclusion, then the Court’s decision will be binding law across the country. As such, the Supreme Court’s decision could have substantial implications for debtors in the Chicago area.
Discuss Your Case with an Oak Park Bankruptcy Lawyer
If you have questions about your bankruptcy case and the FDCPA, an experienced Oak Park bankruptcy lawyer can help you. Contact the Emerson Law Firm today to get started.
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