Virginians who are considering filing for Chapter 13 bankruptcy might want to be aware of a recent Supreme Court decision that concerned the ability of debt collectors to file stale claims. The Supreme Court’s ruling has confused attorneys around the country and may lead to additional litigation in the future.
In its ruling, the majority held that debt collectors that file stale claims in a bankruptcy case do not violate federal law. Stale claims are those that are time-barred, and some debt collectors buy these types of old debts in order to try to collect them. The issue is that the Fair Debt Collections Practices Act prohibits debt collectors from engaging in unfair or misleading tactics to try to collect on debts, and some bankruptcy courts have previously held that filing claims for debts that are time-barred are false and misleading practices.
Some attorneys worry that the court’s ruling may lead debt collectors to try to collect on debts that are decades old. While debt collectors may try to make stale claims in bankruptcy cases, it does not mean that the bankruptcy court will approve them, and bankruptcy attorneys are able to object to claims that are uncollectible because of the applicable statutes of limitations.
Chapter 13 bankruptcy may be a way for people to reorganize debts into affordable repayment plans. Debtors may want to consult with bankruptcy attorneys in order to decide whether bankruptcy is a good choice for them. An attorney may advise clients about whether Chapter 7 or Chapter 13 bankruptcy might be better options. They may then help their clients with collecting the information that is needed to complete petitions and accompanying schedules for bankruptcies.