The Tide Has Turned Against Collectors in Bankruptcy

Sunflower Rain“A deluge has swept through U.S. bankruptcy courts of late.  Consumer debt buyers – armed with hundreds of delinquent accounts purchased from creditors – are filing proofs of claim on debts deemed unenforceable under state statutes of limitations,” writes Judge Richard Goldberg in Crawford v. LVNV Funding LLC, et al (11th Circuit 7/10/14).

For years, some collection agencies have gotten away with filing proof of claims on stale debts.  Many states have laws against filing lawsuits on debts where the statute of limitations has passed.  For example, in Georgia, the statute of limitations on credit card debt is six years.  This means that if your credit company has not filed any collection lawsuit on a credit card debt where you have not made any charges or payments within the last years, they cannot sue you.  The claim is barred by the statute of limitations.

Some collections agencies have tried to sneak around the statute of limitations by filing claims in Chapter 13 cases. If a the bankruptcy attorney on the case fails to object to the claim, the stale claim will get paid.  For a long time, there has been no penalty against creditors who deliberately engage in this unfair practice.  The ruling in Crawford v. LVNV Funding changes all of that.

The tide has turned against collection agencies

Collection agencies that file claims on debt that is barred by the statute of limitations can now get hit with an FDCPA lawsuit.  The ruling in Crawford v. LVNV Funding now makes it clear that any collection agency that files a claim in a bankruptcy case that is barred by the statute of limitations can be slapped with an FDCPA lawsuit.  The Federal Fair Debt Collections Act penalizes collection agencies for unfair collection efforts.

If the bankruptcy attorney is alerted that the claim is barred by the statute of limitations, an objection to the proof of claim can be filed to knock it out.

How can consumers protect themselves from collection efforts on claims that are barred by the Statute of limitations?

1.  When the bankruptcy petition is signed, the attorney and the client need to review the age of every single debt.  Clients can review the claims in their case by following their case on line and watching who files claims in their case.  Click here to learn more about this topic.

2.  After the claims bar date passes once the case is filed, both the attorney and the client need to review who has filed claims in the case and see if any claims that are barred by the statute of limitations have been filed.

3.  If a claim that is barred by the statute of limitations has been filed, the creditor who filed it may be liable for damages under the FDCPA.

In 2012, Asset Acceptance got hit with a 2.5 million dollar fine from the FTC for threatening debtors with lawsuits on debts that were barred by the statute of limitation.  Click here to read more on this.

Not knowing your legal rights can be costly to you.

 

Other Posts you might be interested in reading:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

6.  Secrets from the debt collector’s playbook

 

 

 

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