A Supreme Court ruling could directly effect Nashville citizens who are seeking debt relief. The 11th Circuit had ruled that a debt collector was in violation of the Fair Debt Collection Practices Act after it submitted a proof of claim on a time-barred debt to a bankruptcy court. The Supreme Court, however, said that this action did not violate the FDCPA clause prohibiting “false, deceptive, or misleading” practices.
The Supreme Court found in its conclusion that the determination of a deceptive act relies on the “legal sophistication” of the people on the receiving end. In this case, those people are Chapter 13 bankruptcy trustees who examine the validity of right to payment claims and would, in theory, object to all time-lapsed claims.
According to a representative of the National Creditors Bar Association, the duty of Chapter 13 trustees was upheld by the decision. The representative also stated that the same reasoning behind this decision could be used to allow collectors to sue for repayment of old debt, which is a practice lower courts have barred citing the FDCPA. One critic of the decision stated that the practice of filing old claims takes advantage of “weaknesses in the bankruptcy system”.
Chapter 13 can provide an opportunity for some to stop foreclosure, reduce interest payments and establish manageable payments on their debt. However, Nashville residents filing for Chapter 13 may need to beware of the risk that accounts too old to be collected can still come up during proceedings. This could lengthen repayment plans and result in unnecessary negotiations should an over-burdened trustee fail to provide an objection. An attorney who is familiar with the process may be able to help protect individuals from these pitfalls.