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The U.S. Supreme Court issued a decision regarding barred stale claims during bankruptcy proceedings and violations under the Fair Debt Collection Practices Act.

Midland Funding LLC v. Johnson was originally heard in the Southern District of Alabama. The specifics involved a debtor, Aleida Johnson, who filed for chapter 13 bankruptcy. Petitioner Midland Funding, filed a claim indicating that Johnson had an outstanding credit account, although the last charge on the account was from over 10 years prior. The case becomes interesting here, as the statute of limitations for collection of this debt is only six years, placing the claim from Midland Funding well beyond statutory limits for Alabama. Johnson would go on to challenge the actions of Midland Funding by claiming that they violated the Fair Debt Collection Practices Act (FDCPA) – an act meant to protect debtors during the collections process. More specifically, Johnson argued that the filing of a claim after the limitation expired constituted “false, deceptive, misleading, unconscionable, or unfair” conduct, which the FDCPA prohibits.

Justice Breyer, writing for the majority in a 5-3 decision, held that filing a proof of claim that is time barred is not a false, deceptive, misleading, or an unconscionable debt collection practice within the understanding of the FDCPA. The court defended the decision by pointing out that stale claims may be objected to later in chapter 13 bankruptcy proceedings, and further untimeliness may be used as a later defense.

The decision adds an interesting wrinkle for the FDCPA and bankruptcy proceedings. When one is navigating the intricacies of bankruptcy law and debt collection, you may want an experienced lawyer on your side. If you find yourself with the need to file bankruptcy or fighting off debt collectors, feel free to reach out for help from any of our attorneys at McCarthy, Callas, & Feeney. The firm practices primarily in Rock Island and Moline, Illinois, and Davenport, Iowa. Please reach us at 309-788-2800.


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