FDCPA Violations for Proofs of Claims in Chapter 13 Cases

FDCPA Claims in Chapter 13 for Stale Proof of Claims

I have previously written about the potential for FDCPA claims after filing for bankruptcy and having a debt collector contact you regarding a debt that was discharged in the bankruptcy filing.


Essentially, the attempt to collect a debt that had been discharged in a previous filing was generally a violation of the FDCPA since the FDCPA prevents the collection of debts not owed by a consumer. Our office has vigorously defended the attempts to collect discharged debt for the past several years from collectors looking to pay pennies on the dollar for old debt in hopes that it could be collected. Most collectors never bother to check the status of the debt, previous settlements, bankruptcy or any other factor which may make a debt uncollectible. Instead, the collector just purchases a set of accounts and begins collection activity immediately. For a shocking look at the business of selling collection accounts check out this story: http://www.nytimes.com/interactive/2014/08/15/magazine/bad-paper-debt-collector.html

Another method of attempting to collect debts which are not collectible by collectors is to actually chase people after they have filed for Chapter 13. There is a huge business of selling debt to collectors by the original creditor after a person has filed for Chapter 13 relief. The collectors buy the debt for pennies on the dollar, file a claim for the full amount and hope to make more from the Chapter 13 payoff than they paid for the account. If they weren’t making money this way, the collectors would not continue to buy the accounts and file claims.

 One reason the bankruptcy accounts can be so cheap is that they can be very old. Recently, I have seen claims from the 1990s filed in Chapter 13 cases. Claims continue to be filed by collectors long past the date that the law allows them to be collected. In Florida, the statute of limitations for claims is five (5) years from the date of the default.

 Recently, the 11th Circuit Court of Appeals in Atlanta issued an opinion which may finally put an end to the practice of filing stale claims in Chapter 13 cases. Crawford v. LVNV Funding, http://law.justia.com/cases/federal/appellate-courts/ca11/13-12389/13-12389-2014-07-10.html

 Crawford found that filing a Proof of Claim in a Chapter 13 case for a debt which is uncollectible under a State statute of limitations was a violation of the FDCPA. When a debt collector violates the FDCPA, they are responsible for the up to $1,000.00 in damages and attorney’s fees and costs. Damages may be doubled if the State Statute regulating collection has also been violated. Our office has been actively checking all proofs of claims in every Chapter 13 case that we have filed in the past two years to determine if there have been claim violations. This effort will, hopefully, result in recoveries for our Chapter 13 clients, increased distributions to legitimate creditors and possibly shorter plan periods for some clients.

 If you feel that you may benefit from a Chapter 13 filing or a review of claims in your case, contact our office at 904.725.0822 for a free consultation.

Bryan Mickler