In a decision that many see as a setback for consumers and their advocates, The US Supreme Court ruled that debt collection companies could not be sued for trying to recover years-old credit card debt from people who filed for bankruptcy.
Consumer groups who opposed the 5-3 ruling claim that debt collectors unfairly mislead people into repaying old debts when the law does not require them to.
The divided court sided with Midland Funding. They were attempting to collect $1,879 in debt that was more than ten years old. Aleida Johnson, the debtor, is a resident of Alabama, a state that has a six-year statute of limitations for creditors to collect delinquent accounts.
Johnson avoided paying the debt. However, a federal appeals court ruled that she could pursue a lawsuit against Midland for violating the Fair Debt Collection Practices Act. The FDCPA prohibits collectors from making false or misleading statements or attempting to recover debt through unfair means.
Justice Stephen Breyer wrote for the majority. He argued that collection acts against old debt during the bankruptcy process do not violate the law, nor were the statements of the collection agency misleading. A bankruptcy trustee can still object to any claims that are beyond the statute of limitations and do not have to be repaid. That should reduce any concerns of unsuspecting consumers paying debts that are too old.
In her dissent, Justice Sonia Sotomayor wrote that unfair and unconscionable practices allow professional debt collectors to build a business by buying old debts and filing claims in bankruptcy court, hoping that no one notices that it cannot be enforced.
Whether debts are recent or beyond their “expiration date,” representation from a bankruptcy attorney can help consumers even the odds against aggressive and harassing debt collectors.