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July ABI Journal Article Provides In-Depth Look at Supreme Court's Midland Funding Decision and the Questions that Remain Surrounding Stale Debts in Bankruptcy

Alexandria, Va. — The cover article of the July ABI Journal examines the Supreme Court’s decision in Midland Funding, LLC v. Johnson, No. 16-348, and provides an in-depth look at the issues surrounding the Fair Debt Collection Practices Act (FDCPA), debt-buying industry and bankruptcy. “The issue addressed by the Supreme Court was whether it is a violation of the FDCPA when a debt collector knowingly files an accurate proof of claim for which the statute of limitations for the underlying debt had expired,” Alane A. Becket and Jason Urey of Becket & Lee, LLP (Malvern, Pa.) write in their article “Supreme Court Breathes New Life into Old Debts in Bankruptcy.” “The Court held that ‘filing (in a Chapter 13 bankruptcy proceeding) a proof of claim that is obviously time-barred is not a false, deceptive, misleading, unfair, or unconscionable debt-collection practice within the meaning of the [FDCPA].’”

Becket and Urey write that the debt-buying business has contributed to dramatic growth and significant change, and criticism, in the debt-collection market since passage of the FDCPA in 1977. In a typical debt-purchasing transaction, the authors said that a large institutional lender packages and sells its charged-off debt at a discount to a purchaser that undertakes a collection effort on its own behalf. This practice is unlike the traditional debt-collection model where an agent collects a debt on a creditor's behalf.

“The clear aim of a debt buyer is to collect enough of that debt to realize a profit either by direct contact with the debtor or through formal means, such as filing lawsuits or pressing a claim against an estate in bankruptcy,” Becket and Urey write. “As of the writing of this article, debt buyers have been considered to fall within the definition of ‘debt collector’ under the FDCPA, which prohibits (among other things) deceptive, misleading, unfair or unconscionable conduct in the collection of a debt.”

Amidst the questions resolved in the Supreme Court’s decision in Midland Funding, Becket and Urey write that some remain surrounding stale debts and bankruptcy. “Foremost, the issue of whether preclusion applies to bar an FDCPA action in bankruptcy was not specifically decided,” according to Becket and Urey. “However, it would seem that the analysis employed to determine that the FDCPA was not violated implies that preclusion is not likely.”

To obtain a copy of “Supreme Court Breathes New Life into Old Debts in Bankruptcy” from the July edition of the ABI Journal, please contact ABI Public Affairs Manager John Hartgen at 703-894-5935 or jhartgen@abiworld.org.

For more information on Midland Funding, LLC v. Johnson, be sure to visit ABI’s Supreme Court page: http://www.abi.org/supreme-court-opinions/midland-funding-llc-v-johnson-no-16-348

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.