Once a consumer disputes a debt according to the requirements of the Fair Debt Collection Practices Act, debt collectors and third-parties must cease collection activities. The Court of Appeals for the 6th Circuit, of which Tennessee is a part, ruled that third-party collections that were set in motion by the debt collector must cease when the consumer disputes the debt. The case involved pre-foreclosure activities by third parties, but it is likely that lawyers for debtors will argue it applies to all third-party collections activities.

The district court had granted summary judgment favoring the debt collector in the case, a law firm, because it had ceased its owned collections actions once the dispute was received. The 6th Circuit reversed the lower court’s decision, however, saying that the FDCPA required that the law firm intervene in the actions of third parties it had engaged to help pursue the debt. Specifically, the law firm had contacted a newspaper to post a foreclosure notice and arranged for a sheriff’s sale of a property held by the debtor.

The law firm received notice of the debtor’s dispute before the notice was published. When the notice was published, the debtor filed an FDCPA lawsuit seeking an injunction against the sale. The 6th Circuit agreed with the debtor and noted that mortgage foreclosure actions qualify as debt collections under the FDCPA. Since the debtor also filed for Chapter 13 bankruptcy protection, the foreclosure sale did not commence.

When a person files for bankruptcy in Tennessee, there will be an automatic stay placed on debt collections. This stay can give the person relief from debt collectors. A lawyer with experience practicing bankruptcy law might be able to suggest options for debtors who want to eliminate credit card debt, medical bills or other outstanding debts. For people with regular income, Chapter 13 bankruptcy might allow for a restructuring of debts and a fresh financial start.