More often than they should, debt collectors contact people after the bankruptcy is over.
I’m Northern Virginia Bankruptcy Lawyer Robert Weed, and I hate it when people do illegal stuff to my customers. When debt collectors pester my clients after bankruptcy, I sue them. That’s why I was glad to see what the Second Circuit decided yesterday in the case of Garfield v Ocwen.
Here’s what they said. If a debt collector bothers you after bankruptcy and a debt discharged by the bankruptcy, you can sue them under the Fair Debt Collection Practices Act. Why is that important? Because the Fair Debt Collection Practices Act gives you the right to sue them for $1000.00 in statutory damages.
That right, to sue under the Fair Debt Collection Practices Act, is on top of your right to complain to the bankruptcy judge.
If there’s a violation while the bankruptcy is going on, the bankruptcy court is probably where you want to be. Because the bankruptcy code provides for “punitive damages” for continuation of collection acts while the bankruptcy is still on. (That’s 11 USC 362(k).) That means the judge can slap them as hard as he wants.
(You can read a good example of a judge slapping them hard, in the case of Parker v. Credit Central. Credit Central kept going in court against Marion Parker, even after her bankruptcy was filed. The bankruptcy court awarded Parker $10,000 in punitive damages and $30,000 in legal fees. In December 2015, the 11th Circuit Court of Appeals said the bankrutpcy court was OK to do that. “Because Credit Central committed the type of conduct that the automatic stay was created to prevent, punitive damages were appropriate to serve the dual purposes of punishing Credit Central for its indifference to the law and Parker’s rights and to deter it from committing future similar misconduct.” )
Once the bankruptcy is over, all you can get from the bankruptcy court are actual damages. (For example, if you got garnished, you could get the garnished money back; and if the garnishment caused bounced check fees, you could get those too.) But nothing for your trouble. Nothing to slap their hand, to remind them to respect the law.
Debt collectors understandably don’t like to get $1000.00 slaps on the wrist, under the FDCPA. So they argue that the Bankruptcy Code should be the only law that applies. The Ninth Circuit bought that argument in a decision called Walls v Wells Fargo, back in 2002. Most other courts have ignored it, but this past summer a Federal Judge in Roanoke agreed. Lovegrove v Ocwen.
We’re fighting this issue right now, in the US District Court in Alexandria, VA. We are going after McCabe, Weisberg & Conway for this after bankruptcy letter. On the second page, it says “if you have obtained a bankruptcy discharge, this is not an attempt to collect a debt from you.” But it also says, “THIS IS AN ATTEMPT TO COLLECT A DEBT.” And on the first page it says, “The amount of the debt is $325,547.42.”
We think that violates the FDCPA in two ways. First, it’s a false statement of the “amount or legal status of any debt.” Second, saying that it “not an attempt to collect a debt” and that “THIS IS AN ATTEMPT TO COLLECT A DEBT”–that’s “misleading.” Both of those violate the FDCPA at 15 USC 1692e.
The Judge here will let us know what she’s decided, on January 29, 2016. I’ll keep you posted.
Well, we lost. Judge Brinkema told them that their letter was confusing–it confused her, she said. But she told us that our only complaint was with the Bankruptcy Court. She wasn’t about to bother with it, under the FDCPA.
This issue went to appeal at the Fourth Circuit in a case called DuBois v Atlas 15-1945. (But the Fourth Circuit ducked it. They ruled against the consumer in a different way, and said they’d take up the issue we’re concerned about another day.) So for now, we are out of luck on this. We have three or four cases, even clearer violations, that are on hold right now.
In a new decision called Owens v. LVNV, the 7th Circuit said that applying to be paid in a bankruptcy on a debt that’s too old, is NOT an FDCPA violation: because it’s not misleading. (The consumer has a chance to figure it out if they look, apparently.) But any false statement during (and presumably after) the bankruptcy would be an FDCPA violation. Judge Brinkema is clearly out of step when she said that the consumer can only complain to the bankruptcy court. We hope the 4th Circuit will tell her that, soon.