Requesting Payment on Time-Barred Debts Not an FDCPA Violation if Done in Bankruptcy, Says Supreme Court

time-barred debts fdcpaThe Supreme Court recently ruled on the issue of whether a debt collector violates the Fair Debt Collection Practices Act when they file a request for payment in a bankruptcy when the debt is past the statute of limitations, or time-barred debts.

The court concluded that unlike in regular collection cases, it is not a violation of the FDCPA to do so. In a normal debt-collection lawsuit, however, filing a case past the statute of limitations is a violation of the federal Fair Debt Collection Practices Act.

To receive payment in bankruptcy proceedings, a debt collector has to file a request for payment called a proof of claim. Many debt collectors and debt buyers have been filing these regardless of whether the debt is past the statute of limitations.

In Massachusetts, the statute of limitations on most contracts, such as credit card debt, is six years under General Laws chapter 260, section 2.

To file a proof of claim for payment on time-barred debts is not unfair, false, deceptive, or misleading, said the court, and thus does not violate the FDCPA.

Why would the highest court in the land come to this conclusion? The court said that the bankruptcy law defines the term “claim” as any right to payment, and just because the debt is past the statute of limitations, it doesn’t mean the debt collector doesn’t have a right to payment.

The court rejected the consumer’s argument that a bankruptcy case is similar to a debt-collection lawsuit, in which such claims violate the FDCPA. The court also reject the argument that these type of debt-collection practices harm consumers.

The decision was split, with five justices ruling in favor of debt collectors, and three of the more liberal justices dissenting

The decision is here: Johnson v. Midland Funding

Josef Culik

Josef Culik

Attorney Joe Culik has built his reputation on helping people and has dedicated his practice in Boston, Massachusetts to consumer protection, employee rights, and individual personal injury. He has advocated for individuals against some of the largest companies in America and has a passion for helping people uphold their rights against impossible odds. He has filed both individual and class-action lawsuits against most of the major banks, against some of the biggest debt collectors and credit reporting agencies, as well as insurance companies and corporate employers. Contact Joe