Debt collection companies in Ohio and across the country are part of a growing industry that is already worth about $13.7 billion each year. These companies buy tranches of debt for as little as 1 or 2 cents on the dollar, and they then hound consumers for payment using tactics that sometimes verge on harassment. Companies in this sector sometimes ignore the provisions of consumer protection laws, and they also frequently submit proofs of claim for what are known as time-barred debts in personal bankruptcy cases.
Each state has a statute of limitations in place for debts, but debt collectors often ignore these rules and submit claims for debts that are no longer eligible for payment. When debt collection companies do this, they place an additional and unnecessary burden on the bankruptcy court system.
The courts have not ruled consistently when debtors have filed lawsuits claiming that this practice violates both the Fair Debt Collection Practices Act and the nation's bankruptcy laws. Oral arguments were made before the U.S. Supreme Court on Jan. 17 in a case involving a Chapter 13 bankruptcy and time-barred proofs of claim. The office of the U.S. Solicitor General filed an amicus brief in support of the debtor involved.
While debt collectors routinely violate many regulations, they generally cease contact when debtors file personal bankruptcy petitions. Putting an end to creditor abuse is one of the most immediate benefits of a personal bankruptcy, and attorneys with experience in this area may point out that filing a Chapter 7 or Chapter 13 petition also gives those struggling with unmanageable debt the opportunity to have a fresh start. Attorneys could also answer questions about issues like Chapter 7 means tests, holding onto assets like houses or cars and rebuilding credit ratings after a bankruptcy has been discharged.