Collection of Time-Barred Debts in Bankruptcy May Violate FDCPA
A recent decision by the 11th Circuit Court of Appeals determined that it is a violation of the Fair Debt Collection Practices Act for a creditor to try to collect a debt in bankruptcy, when that debt is otherwise barred by the statute of limitations.
In Massachusetts, the statute of limitations to collect a debt is generally six years from the date of your last payment. Once six years have passed, you are no longer responsible for the debt. Any lawsuit filed on this time-barred debt would violate the Fair Debt Collection Practices Act and potentially the Massachusetts Attorney General’s Debt Collection Regulations.
In a Chapter 13 bankruptcy, though, it has long been a regular practice for creditors to file claims on time-barred debts in order to collect payments. While these claims can be objected to and struck down as improper, the question of whether they are sanctionable under the Fair Debt Collection Practices Act has been less clear.
The FDCPA prohibits actions by debt collectors to compel payment of time barred debts. In determining that this rule also applies in bankruptcy cases, the Court stated that this practice is so common that it’s resulted in a “deluge” of improper bankruptcy claims. Crawford v. LVNV Funding LLC, 2014 WL 3361226 (11th Cir.) The Court held that these types of claims are unfair, unconscionable, deceptive, and misleading.
Unfortunately, the Court did not specifically state that the FDCPA always applies in the bankruptcy context, and decisions on this vary throughout the country. In Massachusetts there is no clear answer on this, so I am hopeful that the 11th Circuit’s reasoning will be persuasive.
If you have being contacted for debts that may be time-barred, then please contact us for a free consultation.
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