Appeals Court Upholds Dismissal of FDCPA Case Over Collection of Post-BK Student Loan

The Court of Appeals for the Third Circuit has affirmed the dismissal of a Fair Debt Collection Practices Act case against a student loan servicer for continuing to attempt to collect a student loan debt after it had been discharged in bankruptcy because the plaintiff failed to follow the proper procedure.

A copy of the ruling in the case of Kaetz v. Educational Credit Management Corp., Equifax, TransUnion, and Experian can be accessed by clicking here.

The plaintiff filed for Chapter 7 bankruptcy protection in 2012. In the petition, he listed ECMC as a creditor. A bankruptcy judge granted the plaintiff’s petition to have his debts discharged. The defendant then used “harassing phone calls and letters” to attempt to collect on the debt and reported the debts to the three major credit reporting agencies. The plaintiff filed suit, alleging ECMC violated the FDCPA and the credit reporting agencies violated the Fair Credit Reporting Act by attempting to collect a debt that had been discharged. A District Court judge granted the defendants’ motion to dismiss, ruling that the plaintiff failed to state a claim because his premise — that his student loan debt had been discharged — was incorrect. Under Section 523(a)(8) of the bankruptcy code, student loan debt is presumptively non-dischargeable and the plaintiff had not filed an adversary proceeding to determine otherwise.

The plaintiff appealed, arguing that he was not required to file an adversarial proceeding because he had been declared indigent, which satisfied the hardship exception of 523(a)(8). But a finding of hardship is not the same as being declared indigent, the Appeals Court ruled. “His argument on appeal, however, is based on the fact that the statute does not direct the filing of an adversary proceeding,” the Appeals Court wrote. “As discussed above, the Bankruptcy Rules address the applicable procedure. Kaetz has not established that the statute is constitutionally infirm.”

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