Midland Funding, the giant California-based debt buyer, narrowly escaped judgment in the United States Supreme Court in May 2017, when the nation’s highest justices ruled 5-3 that they couldn’t be sued by a bankrupt debtor for filing a stale claim — i.e. a claim involving a debt where the statute of limitations had expired — in her bankruptcy case.
Only a handful of bankruptcy cases go all the way to the Supreme Court in a given year, and this one stands out because it also involves the seldom-litigated Fair Debt Collection Practices Act (FDCPA).
Aleida Johnson had filed for Chapter 13 bankruptcy in Alabama when Midland filed a claim in her case for a whopping $1,979.71 credit card debt. Trouble was, the debt was over ten years old and well past the statute of limitations. Johnson’s lawyer objected to the claim and it was denied by the bankruptcy judge. Then he turned around and sued Midland for damages under the FDCPA.
Not so fast, says the majority of the Supreme Court justices. Just because the debt was old didn’t mean that Midland’s claim rose to the level of being either false, deceptive, misleading, unconscionable, or unfair, any one of which are needed to win a case under the FDCPA. The majority opinion was written by Justice Stephen Breyer of Massachusetts.
The three dissenting justices (Sotomayor, Ginsberg, and Kagan), pointed out that it wasn’t realistic for Chapter 13 trustees to police all the unsecured claims in their cases for statute of limitations problems.
You can read the full opinion in Midland Funding LLC v. Johnson by clicking here.
by Doug Beaton