The U.S. Supreme Court heard arguments last Tuesday regarding debt collection tactics employed during the bankruptcy process. Some debt collectors are requesting very old debts that have long expired to be paid in bankruptcy proceedings. They have been asking for payment on old debts that, under local state laws, are non-collectible.
Some kinds of debt, like medical bills and credit card debts, cannot be collected following three to six years. Some advocates for consumers are saying that the Fair Debt Collection Practices Act of 1977 requires debt collectors to be fined if they try to collect expired debt. The Fair Debt Collection Practices Act prevents debt collectors from employing unfair or misleading collection strategies.
In defense, debt collectors argue that bankruptcy laws say it is perfectly legal for them to request payment. Nevertheless, Supreme Court justices asked numerous questions that were critical of the debt collection industry's business model in Tuesday's hearing. The justices asked why a debt collection agency would file a claim that should not be made in the hopes that the bankruptcy trustee wouldn't notice that the debt was 10 years old and non-collectable under state law.
At this time, it is still unclear how the court will decide this case. A decision is expected before the end of June.
King County residents who are suffering from too much debt may be able to get relief from the bankruptcy process. However, it is important to recognize how important it is to have a legal counselor available to advocate for you in your case. In the above situation, for example, a bankruptcy lawyer would immediately recognize the unscrupulous practice of a creditor trying to collect on an expired debt and take action to prevent that debt from needing to be paid.
Source: Wall Street Journal, "Supreme Court Hears Arguments on Collection of Expired Debts," Katy Stech, Jan. 17, 2017