Does filing a time-barred proof of claim violate the Fair Debt Collection Practices Act (FDCPA)? This is an issue which has witnessed divided opinions in the Circuit courts and the Courts of Appeals.
Currently, the Supreme Court has granted certiorari, whereby it will review this in the case of Midland Funding LLC vs. Aleida Johnson (Midland vs. Johnson) where the Eleventh Circuit has ruled. Federal circuits other than the Eleventh hold that filing a proof of claim based on a time-barred debt is not a violation of the FDCPA. This particular view was also reinforced by the Fourth Circuit when it held that the filing of accurate proofs of claim did not violate the FDCPA, even on time-barred debts.
A Supreme Court ruling is awaited on the case.
What is time-barred debt in terms of bankruptcy?
Time-bar is a bar to a legal claim arising from the lapse of a clearly defined time period. For example, if a state law holds 8 years as the time duration in which a creditor can collect, but the debtor files for bankruptcy protection after the time has lapsed, creditors may still file a time-barred proof of claim with the hope that it will not be objected.
Why is it so? In terms of bankruptcy, claims are usually allowed unless the debtor objects to it. However, because at times debtors do not object to creditors’ claims, claims are filed on old debts that are time-barred legally. The action is carried out simply on the premise that the debtor will not object and the debt will be cleared from the bankruptcy assets.
FDCPA and time-barred debts
The FDCPA prohibits debt collectors from using unfair practices when collecting any kind of debts. This includes debt companies that buy off debts for a certain amount and then proceed to collect the dues in full.
For debt collectors however, it is important not to push the line on debts that are time-barred. According to the FDCPA outlines, they could be violating the law.
In the current case of Midland vs. Johnson, the Eleventh Circuit Court has held that willingly filing for a time-barred proof of claim in bankruptcy is a violation of the FDCPA.
What options does the consumer have?
The consumer has certain legal rights which protect him or her from harassment and trauma. But, they need to educate themselves on these and understand how best to utilize these for protection from malpractice.
About Us:
Legal Rights Advocates, PLLC is a law firm that specializes in helping clients who are facing harassment under the FDCPA . Our team of attorneys, over the years, has helped countless clients get protections from practices that are deemed as unlawful and illegal under the FDCPA.
Call us at (855) 254-7841 for immediate assistance to put a stop to intrusive communication over the phone.
(855) 254-7841
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