Florida residents may have heard about a Supreme Court case regarding bankruptcy and the Fair Debt Collection Practices Act. The question before the court is whether a proof of claim filed in bankruptcy court violates that act if a debt buyer or collector knows that the statute of limitations has expired. It is standard practice for such entities to robosign such claims without looking to see if statutes of limitation have expired on them.
The case in question involves debt purchaser Midland Funding, LLC. The 11th Circuit ruled that a debt collector violates the FDCPA because filing proof of claim on stale debt is deceptive and misleading. Therefore, it would go against prohibitions against using false, misleading or deceptive when attempting to collect a debt.
Midland believes that the Bankruptcy Code allows a proof of claim to be submitted on an unextinguished debt even if it is time-barred. This is according to a brief provided by the company. It claimed that it had a right to collect on the debt under Alabama law, which meant that it had a right to file the proof of claim. However, according to the U.S. Solicitor General, the FDCPA prohibits a debt collector from filing a proof of claim if the collector knows that the debt is time-barred.
There may be many benefits for those who choose to file for bankruptcy. It may allow individuals a fresh financial start or put a temporary stop to foreclosure or repossession. Typically, a debtor is granted a stay of creditor collections until a case is resolved. In some cases, debts may be immediately discharged, which means a debtor is no longer obligated to pay.