Bankruptcy and The Fair Debt Collection Practices Act

Transcription

1 Bankruptcy and The Fair Debt Collection Practices Act Rex Anderson 1 Why am I sitting here? I hope Rex is going to show me how to help my clients AND Make money 2

2 Debtor In Bankruptcy Debtor is insolvent and cannot pay her bills as they become due Needs protection from creditors in exchange for disclosure and distribution of Debtor s non-exempt assets. 3 FDCPA - Consumer Consumer is a protected person from abusive, deceptive and unfair collection Acts as private Attorney General to enforce FDCPA and hold violators accountable. 4

3 Automatic Stay Automatic stay goes into effect at time Bankruptcy petition is filed - 362a Stay Order prohibits collection attempts unless Stay is lifted All listed creditors receive notice from Bankruptcy Court. Exhibit #1 to AP or FDCPA case 5 Discharge Injunction Final Bankruptcy order entered at completion of case Discharges debts Injunction against any further collection attempts to collect discharged debt Exhibit #1 to AP or FDCPA case 6

4 Notice of Meeting of Creditors Notice provides Bankruptcy case #, Meeting of Creditors date and location. Dates for filing Proof of Claim and deadlines to file Adversary Proceedings objecting to discharge of debts 7 Should debtor bring an FDCPA case? Many insolvent clients have received numerous collection letters and phone calls that violate the FDCPA Many potential bankruptcy clients are struggling with the most aggressive and abusive debt collectors 8

5 Where and when to file a FDCPA case? After debtor collector violates the law, Plaintiff must decide which forum to file lawsuit File FDCPA case in Federal District Court and wait on bankruptcy Pre-petition - quick settlement to help pay for bankruptcy preparation fees. Good marketing. Or file for Bankruptcy relief and bring Adversary Proceeding in BK court 9 Pitfalls in a BK and FDCPA practice Schedule and Exempt FDCPA claim or lose it List unknown value for actual damage claims plus attorney fees Up to $1000 claim for statutory damages Research controlling authority about bringing FDCPA claim for an attempt to collect after the bankruptcy filing 10

6 FDCPA Overlaps with BK Collector harassment can be both FDCPA and Stay-Discharge violation Some BK courts will officially decide FDCPA claims others BK courts will not BK court can still consider the violations of other law when fashioning relief for Stay or Discharge violations 11 Can I file an FDCPA claim during my bankruptcy Chapter 7- Must have Court abandon first, just wait for the bankruptcy to be over Chapter 13- Debtor has right to bring claims. Cable v. Ivy Tech (7th Cir). Strategy: May be best to file after Ch. 13 confirmation 12

7 If SOL will expire when debtor in BK File Motion with Court to abandon the FDCPA claim Trustee usually does not oppose Court will grant this on an expedited basis FDCPA SOL is one year from violation 13 What if consumer failed to list an FDCPA claim Consumer has no standing to sue Reopen the bankruptcy case and list the asset If no asset case and claim is exempt trustee will probably not object Or file for Discharge violation 14

8 Attempts to Collect after the Bankruptcy Collection attempts after bankruptcy s automatic stay, may be FDCPA violations as well as Stay and Discharge violations. Forum Shopping Know your judge(s) Punitive damages available in BK 15 Different Elements FDPCA claims are strict liability and therefore easy to prove BK Judges usually require more egregious conduct after warnings to stop collection attempts Many BK Judges require medical proof of emotional distress and causation 16

9 Collection Attempts after Discharge Injunction Discharge Violations may also be FDCPA violations See Randolph v. IMBS 7 th Cir. (yes) and Walls v. Wells Fargo 9 th Cir. (no). Cases distinguishing Walls v. Wells Fargo, Church v. Onewest, 2011 U.S. Dist. LEXIS (D. OR 2011) 17 What if the debt collector files bankruptcy File Proof of Claim Move for lift of Stay to go after insurance File Contempt motion/adversary Proceeding in BK Court if the debt collector committed fraud, abuse, intentional tort, etc. (11 U.S.C. 523) 18

10 List claims in Bankruptcy For FDCPA purposes, the three most important schedules are Schedules B and C, and the schedules listing the creditors. Schedule B is is where you list your clients' FDCPA claims. Schedule C is where Debtor exempts claims under state or federal law. Wild card exemption. How to value claim? Talk to local practitioners, trustees, etc. (up to $1000 statutory plus actual damages) Does not apply to Discharge violations FDCPA Remedies Actual Damages Statutory Damages Class actions Attorney s Fees and Costs No punitive damages No injunctive relief 20

11 Bankruptcy Remedies Protect debtor from collection Discharge debt Protect right to fresh start Actual and punitive damages Attorney fees No adverse tax implications 21 BK Punitive Damages Willful means that the creditor knew or was on notice of the stay or discharge and that the action taken was intended, not that the creditor intended to violate the stay or injunction itself. In re Lafferty, 229 B.R. 707, 713 (Bankr. N.D. Ohio 1998) 22

12 BK Clear and Convincing A debtor who alleges a violation of 524(a)(2) must establish by clear and convincing evidence that the violation occurred and that the alleged violator acted with knowledge of the injunction. In re Johnson, Slip Copy, 2011 WL , at *7 (E.D. Mich. May 23, 2011) 23 What are Actual Damages? Actual damages include out of pocket expenses and for personal humiliation, embarrassment, mental anguish or emotional distress. BK violations allow debtor compensation for time spent enforcing the court s discharge order. In Re McClure. 24

13 Statutory Damages $1,000 per action, per defendant The frequency and persistence of noncompliance The nature of such noncompliance, and The extent to which such noncompliance was intentional 25 Attorney s Fees and Costs The amount of fees and costs need not be proportional to the amount of damages recovered Similar to civil rights cases Settlement negotiations Admissible to show Defendant s conduct increased Plaintiff s legal fees and costs 26

14 Damages for trying to collect debts discharged in Bankruptcy In re Crawford, 388 B.R. 506 (S.D. NY 2008)($60,000 punitive damages under BK law) Miele v. Sid Bailey, 129 B.R. 611 (S.D. NY 1996)($60,000+) 27 Bona Fide Error Defense Debt collector must show the violation was unintentional The violation resulted from a Bona fide error (i.e., good faith mistake) Notwithstanding the maintenance of procedures reasonably adopted to avoid the avoid the violation 28

15 BFE is a Narrow Defense BFE is NOT applicable in Bankruptcy and is a narrow defense under the FDCPA. It applies to clerical errors. When the debt collectors acts are intentional the narrow BFE defense does not apply. A willful error by a collector s employee or agent, such as a harassing phone call, cannot be said to be unintentional even if it violates the collector s policies. 29 What a consumer can do to document violations Make notes of dates and times of calls In certain states, record the phone calls Save all voice mails Google voice Obtain copies of cell phone bills Make photo of caller I.D. unit Send cease and desist letters with requests to provide evidence of the debt Dispute debt with CRAs 30

16 Documents Needed (Discovery) Collection logs Procedure and training manuals Telephone billing and call records Electronic Stored Information (ESI) FDCPA compliance procedure Hierarchy chart of corporate officers 31 Biographical Rex Anderson specializes in consumer bankruptcy adversary proceeding, FDCPA and TCPA litigation. He practices in the Eastern District of Michigan (Detroit and Flint) and was admitted to the Bar in