An individual who is filing, or has filed, for bankruptcy faces all manner of complex consumer financial issues. Many consumer cases present multiple venue choices, federal court, state court or bankruptcy court. Sometimes, in cases of more egregious consumer law violations, your client may recover enough funds to avoid filing a petition.
The intersection of consumer laws for the bankruptcy client.
- Can your bankruptcy client file a case in bankruptcy court as well as federal district court? A debt collector violates the Fair Debt Collection Practices Act in one or more ways, but your client is in an active bankruptcy. Can he sue under the Act in federal district court, where the remedy may be better, as well as in bankruptcy court? The trend is decidedly a “yes.” He has a choice of forum. See Simon v FIA Card Services, N.A., 732 F.3d 259 (3d Cir. 2013)
- A creditor files a Proof of Claim in bankruptcy court over a debt upon which the statute of limitations for collection has passed. Does this constitute a Fair Debt violation, which generally prohibits suits or threats of suit, upon a time-barred debt? After the 11th Circuit held "yes" in 2014, the trend has been decidedly against, holding that the mere filing of a proof of claim in bankruptcy court on a time-barred debt is not in itself a Fair Debt violation. Owens v LVNV Funding, LLC., 2016 WL 4207965 (7th Cir. Aug. 10, 2016) The U.S. Supreme Court has agreed to resolve the circuit split. Midland Funding v. Johnson, No. 16-348 (U.S. October 11, 2016)
- Both the husband and wife are co-mortgagors on their home mortgage loan. The husband, but not wife, filed for bankruptcy. All monthly payments were made on time throughout. The bank reports to the credit bureaus that the wife’s mortgage loan was “included in bankruptcy,” harming her credit score. Although this may be technically accurate, the credit reporting law carries a higher standard. The wife may have a claim against the bank or credit bureau for the reporting because it can create a misimpression that the wife has filed bankruptcy. Evantash v G.E. Capital Mortgage Serv., Inc., 2003 WL 22844198 (E.D. Pa. Nov. 25, 2003)
- A debt collector or collection law firm that continues to communicate with your bankruptcy client after being notified of your representation violates not only the Bankruptcy Code, but the Fair Debt Collection Practices Act, 15 U.S.C. 1692c(a). However, you need to determine, depending on the timing of the contact, whether this is an asset of the debtor or of the estate. While some Fair Debt claims yield only statutory damages of $1000, bear in mind that collector conduct with third parties creates actual damages for invasion of privacy and embarrassment. These are actual damage claims that may have a five or six figure value, and permit recovery of statutory attorney fees.
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If your client is a victim of inaccurate credit reporting, abusive collection tactics, the repossession of a vehicle, or unauthorized calls to their cell phone, contact us to discuss whether state or federal consumer protection laws may be able to provide some relief.
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