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Bankruptcy

Bankruptcy is a legally declared inability by an individual, or business, to pay their creditors. The declaration is known as seeking bankruptcy protection (from creditors) or initiating a bankruptcy filing. Unsecured debts — like credit card balances — are typically in peril in bankruptcy filings. But recent changes to the U.S. bankruptcy code have seen more consumers forced to file Chapter 13, which requires a debt repayment plan, rather than Chapter 7, which effectively wipes out unsecured debt.

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Eleventh Circuit Court of Appeals Determines that a “Debt Collector” filing a Bankruptcy Court Proof of Claim on a Time-Barred Account is an FDCPA Violation

In an opinion issued yesterday in two consolidated cases, the Eleventh Circuit Court of Appeals determined that “a particular subset of creditors—debt collectors”—may be liable under the Fair Debt Collection Practices Act (FDCPA) for bankruptcy Proof of Claim filings on debt they know to be time-barred. Both cases were appeals from decisions from the United States District Court for the Southern District of Alabama.

2nd Circuit Rules Bankruptcy Code Does Not Preclude FDCPA Suit in District Court

In Garfield v. Ocwen Loan Servicing, LLC, the Second Circuit Court of Appeals examined whether a debtor who has been discharged in a bankruptcy can sue in a district court under the FDCPA,as opposed to seeking relief in the bankruptcy court. The Court held that the Bankruptcy Code provision governing the discharge injunction, “does not explicitly create a cause of action for its violation, whereas the automatic stay provision provides such a remedy…”

Bankruptcy Code Precludes FDCPA Claim for Filing POC on Time-Barred Debt, Fla. District Court Holds

The U.S. District Court for the Middle District of Florida recently dismissed allegations that a debt buyer violated the federal Fair Debt Collection Practices Act by filing a proof of claim on time-barred debt, holding that such claims are precluded by the Bankruptcy Code, and that the FDCPA does not provide a private right of action against debt collectors who file time-barred proofs of claim in bankruptcy court.

Bankruptcy: A Fresh Start, But at What Cost?

What we’re seeing, recently, in such cases, is that courts are often finding for the creditor – a reversal of the tenor of previous judgments. Attorney Don Maurice wrote back in November of 2014 that “a U.S. Circuit Court decision this summer took an extraordinary step when it held that filing a proof of claim on time barred debt is conduct that violates the FDCPA. At the time, attorneys close to both bankruptcy and FDCPA proceedings warned that it would touch off a very real firestorm in that sector of the ARM industry. That has proven to be quite true.”

10 Years Later: What Have We Learned from BAPCPA?

With a 2014 reporting of just over 3 trillion dollars in non-mortgage consumer debt, up from a 2006 total of 2.4 trillion, why do we see continued reduction in bankruptcy filings? Filings have increased each year but have not yet returned to pre-BAPCPA levels. The amount of reported debt may be deceiving however, as 2006 saw a significant change in the reporting of consumer debt. That was the year that student loan debt started being reported separately from other consumer debt. That change is important, because student loan debt is not normally eligible for discharge in a bankruptcy filing. What we see now is a more accurate accounting of the debt that could be eligible for bankruptcy losses. Those figures allowing for inflation and population growth do not show a significant growth in real potential loss.

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Are You Properly Reporting Bankruptcies to Credit Bureaus?

In May of this year, several of the larger banks were in the news for not correctly reporting debts on credit bureaus that were discharged in bankruptcy. Pursuant to lawsuits, which were filed in White Plains, New York Bankruptcy Court, and investigations by the US Trustee’s Office, the banks were not correctly updating trade-line accounts on consumer’s credit bureaus with information that the debt was discharged in bankruptcy.