Chapter 13 bankruptcy and old debt

Minnesota residents who are considering filing Chapter 13 petitions may want to take note of two recent decisions that arose out of Chapter 13 bankruptcy cases. In both, the courts ruled that creditors holding old debt that was beyond the statute of limitations were able to file proof of claims with the bankruptcy court because the debtor did not object to the filing of the claims.

Both cases involved debtors filing suit under the Fair Debt Collection Practices Act claiming the creditors' actions to collect on the debt through the filed proof of claims was in violation of the act. In the first case out of Indiana, the debtor had listed the debts on his bankruptcy schedules, and the creditor had then filed the proof of claim with the bankruptcy court. The court ruled that asserting the statute of limitations was an affirmative defense, and thus should have been raised by the person's objecting to the filed proof of claims, which he had not done.

The other case was filed in Pennsylvania, and it differed only in that the debtor had not listed the expired debts on its bankruptcy schedules. That court ruled that the filing of a time-barred claim did not violate the FDCPA as there are other protections available to the debtor through the bankruptcy code.

Those who are planning on filing a Chapter 13 bankruptcy petition may need to keep these decisions in mind if they have debt that is beyond the statute of limitations. At a minimum, they may need to discuss their old obligation with their bankruptcy attorney. An attorney might help by filing immediate objections to proofs of claims being filed by creditors holding expired debt.

Source: Inside ARM, "Two Positive Decisions for the Industry Regarding Chapter 13 Cases," Tim Bauer, May 5, 2015.

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