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Court holds that FDCPA and bankruptcy laws don't conflict

Debtors in Florida may be interested in a recent ruling by the U.S. Court of Appeals for the 11th Circuit, the federal circuit that has jurisdiction over federal claims brought in the state. The case involved debtors who had filed for Chapter 13 bankruptcy. The debtors had creditors holding claims that were time-barred by the applicable statute of limitations. Despite the fact that they were, the creditors still filed proofs of claim with the bankruptcy court anyway.

After the creditors filed proofs of claim, both debtors then filed suits against them under the Fair Debt Collections Practices Act. In an earlier case, the district court had held that the FDCPA was preempted by the Bankruptcy Act, interpreting it as precluding a debtor's ability to file claims against collectors who had filed proofs of claim for time-barred debts.

In the recently consolidated appeal, the court held that the two federal laws do not conflict with one another. It instead ruled that debt collectorsmay file proofs of claim in the bankruptcy court, but when they do so for debts they know are uncollectable, the debtors may then file FDCPA suits against them. Because the ruling further deepens a split among different circuits, it is possible that the question may be taken up by the Supreme Court of the United States at some point.

Chapter 13 bankruptcy allows people to keep their property while working to obtain a fresh financial start. In this bankruptcy type, debtors enter into repayment plans through which they repay a portion of their debts over periods lasting between three and five years. If the debtor successfully completes the repayment plan, most of the remaining unsecured debts will be discharged. An attorney can outline the various eligibility requirements associated with this chapter.

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