The U.S. Supreme Court has agreed to hear arguments in a debt collection case, to determine whether individuals who have filed for bankruptcy can sue companies that attempted to collect debts that were beyond the statute of limitations.
The case, Johnson v. Midland Funding, is being appealed by Midland Funding, a unit of Encore Capital Group. The plaintiff, a resident of Alabama, filed for bankruptcy protection in 2014. Midland then tried to collect $1,879 for a debt that was incurred a decade earlier. Alabama has a six-year statute of limitations on debt collections.
Plaintiff’ attorneys argue that debt buyers try to recover funds from individuals even though they have no legal right to do so, unless the individual agrees to repay the debt. The industry’s response is that current bankruptcy law allows for the claims to be filed, even when there is no mechanism to collect.
The Eleventh Circuit Court of Appeals has ruled that filing a claim on an individual in bankruptcy is equivalent to attempting to collect a debt and is therefore a violation of the Fair Debt Collection Practices Act.
