The Supremes Greatest Hits: Debt Collectors Get SCOTUS Docket Time

I can’t believe this. The Supreme Court is giving docket time to the 11^th Circuit Court decision on Midland Funding v. Aldelia Johnson. At issue is whether filing a proof of claim in bankruptcy court on an unextinguished time-barred debt (one where the statute of limitations has run out) violates the Fair Debt Collection Practices Act and whether the bankruptcy laws supersede and preclude applying the FDCPA to debtors in bankruptcy. Here’s how the story goes:

1. 2014: Aleida Johnson files for Chapter 13 bankruptcy in March. In May, Midland Funding – a buyer and collector of unpaid debts – filed a proof of claim in the amount of $1,879.71 for an debt originally incurred in 2003.  Since the bankruptcy was filed in Alabama, that state’s 6-year statute of limitations should have applied.
2. Ms. Johnson and another plaintiff sued their creditors under FCDPA section 1692d, which states that debt collectors may not use false, deceptive, or misleading tactics to collect a debt, and that the claims themselves should have been barred by the statute of limitations.
3. Midland moved to dismiss and was granted the dismissal by the District Court which read the Bankruptcy Code as positive authorization for a creditor to file a claim even for a debt covered by the statute of limitations. However, the court did note that it believes the FDCPA and the revised bankruptcy laws are in conflict.
4. The 11^th Circuit Court reversed and remanded the case, finding that the FDCPA did apply, and that there is conflict between the law and Bankruptcy code, but that the conflict was not irreconcilable.
5. Midland Financing didn’t like that one bit, and filed a petition for a writ of certiorari which was granted.

It’s something of a surprise for the Supremes to take this case on, but in my opinion the law should come down firmly on the side of the debtors. However, in my opinion, the justices don’t understand the how the bankruptcy system works, and I am worried that they will come down on the side of the creditors. If they’re looking to upset a whole bunch of apple carts at once, this is certainly the case to do it, as just about every Circuit Court has had similar cases. They may be looking to settle as many as possible with just this one case.

Instead, without an understanding of the Bankruptcy Code – it’s a specialty practice for a reason – what they could do is render a decision that throws time-barred debts, state statutes of limitations, and even the FDCPA into chaos. With the court splitting four-and-four, there might not even be a decision unless one justice jumps the gap to tip the balance to 5-3.

Buckle up. It could be a bumpy ride.

Now, if you are being hassled by a collections agency for a debt that is past the statute of limitations, come and talk to me. The initial consultation is free, and we can help get these bottom-feeders off your back.