Bankruptcy Court Clarifies FDCPA Requirement

If you are thinking about filing for personal bankruptcy, you may already know that one of the major benefits of bankruptcy filing is the automatic stay. The automatic stay is an injunction that prevents creditors and debt collectors from taking any actions to collect on the debts you owe as soon as you file your petition. Accordingly, the automatic stay prevents creditors and debt collectors from initiating lawsuits against debtors, moving forward with lawsuits, initiating or moving forward with foreclosure proceedings, and even making calls or sending letters in an attempt to collect on debts owed. Yet what happens when a debt collector does not yet know that a debtor has filed for bankruptcy and takes action to collect on a debt? In other words, does the debtor have a claim against the debt collector for a violation of the U.S. Bankruptcy Code or a violation of the Fair Debt Collection Practices Act (FDCPA)?

The U.S. District Court for the District of Puerto Rico issued a decision on this question in the case Carrasquillo v. CICA Collection Agency, Inc. (2022), and the decision could impact future cases in Illinois and across the U.S. Our Oak Park bankruptcy attorneys can tell you more about the case.

Learning More About Carrasquillo

In Carrasquillo, the debtor filed for bankruptcy and later received a debt collection letter from the debt collector CICA Collection Agency. According to the debtor, CICA Collection Agency “knew or should have known that [the debtor] was under the protection of the Bankruptcy Code, as he had filed a voluntary bankruptcy petition on September 29, 2019, which listed the Claro debt,” which was the debt that CICA Collection Agency was attempting to collect. The debtor then argued that CICA Collection Agency had violated provisions of the FDCPA in making a collection effort following the debtor’s bankruptcy petition filing.

The court ultimately ruled against the debtor, clarifying that there was no FDCPA claim. The court was also asked to consider whether the FDCPA claims were precluded by the Bankruptcy Act and its provisions for the automatic stay, but the court ultimately determined that it did not need to address the question of preclusion since it found that the debtor’s “claims fail on the merits and must be dismissed.”

Reasoning in Carrasquillo

In considering the debtor’s claims, the court considered the debtor’s argument that CICA Collection Agency knew or should have known that he had filed for bankruptcy. The court relied on language from a Third Circuit Court of Appeals case, Hubbard v. National Bond and Collection Associates, Inc. (1991), which clarifies that the debt collector must know about the bankruptcy having and have the intent to violate: “A debt collector’s unknowing violation of an automatic stay does not transform an otherwise accurate collection letter into a ‘false representation’ within the meaning of the [FDCPA].”

The court emphasized that the debtor in Carrasquillo did not inform CICA Collection Agency that he had filed for bankruptcy, and the original creditor also did not inform CICA Collection Agency of the bankruptcy filing.

Contact an Oak Park Bankruptcy Attorney

The case suggests that a debt collector will not be found to have violated the FDCPA if it does not have clear information about a debtor’s bankruptcy filing. If you have questions or if you need assistance with your bankruptcy case, one of our experienced Oak Park bankruptcy lawyers can help. Contact the Emerson Law Firm today for more information.



See Related Blog Posts:

Top Things to Consider About Student Loans and Bankruptcy

New Information on Debts That Bankruptcy Cannot Discharge

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