by and <\/p>\n
May 15, 2017, 10:14 AM EDT May 15, 2017, 12:44 PM EDT <\/p>\n
A divided U.S. Supreme Court ruled that debt collectors can use bankruptcy proceedings to try to collect liabilities that are so old the statute of limitations has expired. <\/p>\n
Voting 5-3, the court said companies dont violate the U.S. Fair Debt Collection Practices Act when they file bankruptcy claims on that type of years-old debt. Justice Stephen Breyer joined the courts conservative wing in the majority. <\/p>\n
Critics accused debt collectors of violating the law by filing tens of thousands of outdated claims with bankruptcy courts in the hope that some debtors wont object. <\/p>\n
Get the latest on global politics in your inbox, every day. <\/p>\n
Get our newsletter daily. <\/p>\n
The result of decision appears to give creditors a free pass to file stale claims without fearing FDCPA liability, Andrew Muller, a partner at Stinson Leonard Street LLP, said in an interview. The flip side is that trustees and debtors lawyers may be under increased pressure to more closely review claims to determine whether the claims are subject to a statute of limitations defense, Muller said. <\/p>\n
The ruling is a victory for Encore Capital Group Inc.s Midland Funding in an Alabama case that started with an effort to collect a $1,900 credit-card debt. The debtor, Aleida Johnson, sued Midland after a bankruptcy judge threw out Midlands claim. <\/p>\n
Midland argued that federal bankruptcy law lets creditors file claims in those proceedings even if the statute of limitations wouldnt allow a lawsuit. <\/p>\n
Like the majority of Courts of Appeals that have considered the matter, we conclude that Midlands filing of a proof of claim that on its face indicates that the limitations period has run does not fall within the scope of any of the five relevant words of the Fair Debt Collection Practices Act, Breyer wrote. <\/p>\n
Johnsons lawyers said that, by filing outdated requests, debt collectors are falsely suggesting those claims are valid and enforceable. <\/p>\n
Justice Sonia Sotomayor filed a dissenting opinion in which Justices Ruth Bader Ginsburg and Elena Kagan join. Justice Neil Gorsuch, who joined the court after the case was argued in January, didnt participate in the ruling. <\/p>\n
Professional debt collectors have built a business out of buying stale debt, filing claims in bankruptcy proceedings to collect it, and hoping that no one notices that the debt is too old to be enforced by the courts, Sotomayor wrote. This practice is both unfair and unconscionable, she added. <\/p>\n
Debt collectors do not file these claims in good faith; they file them hoping and expecting that the bankruptcy system will fail., Sotomayor wrote. <\/p>\n
Lower courts had been divided on the issue. The Obama administration backed Johnson in the case. <\/p>\n
The case is Midland Funding v. Johnson, 16-348. <\/p>\n
<\/p>\n
See the original post here: <\/p>\n
Supreme Court Backs Bids to Collect Outdated Debt in Bankruptcy - Bloomberg<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" by and May 15, 2017, 10:14 AM EDT May 15, 2017, 12:44 PM EDT A divided U.S. Supreme Court ruled that debt collectors can use bankruptcy proceedings to try to collect liabilities that are so old the statute of limitations has expired. Voting 5-3, the court said companies dont violate the U.S. Continue reading