The law is ever evolving and bankruptcy law is no different. Despite a large code governing bankruptcy proceedings, there are still many issues for which the code provides no clear answer. One such issue is whether a debtor in bankruptcy is limited to enforcement of the automatic stay provisions under the Bankruptcy Code when a creditor’s collection activity also constitutes a violation of the Fair Debt Collection Practices Act (FDCPA).
U.S. District Court Clarifies Bankruptcy Preemption Issue
In Davis v. NCO Financial Systems, Inc., an October 2, 2014 decision out the Middle District of Florida, the Court ruled that a debtor was not restricted to only to remedies under the Bankruptcy Code where the same actions of the creditor also gave rise to relief under the FDCPA. The Court addressed the issue that the 11th Circuit had left unresolved in Crawford v. LVNV Funding.
We Clarify the District Court’s Decision
If you’re a little confused by the summary above, that’s alright. That’s what we’re here for. As bankruptcy attorneys, we seek to explain complex law in a way that is understandable.
First, the laws you need to know. The FDCPA is a federal law that prohibits unfair and deceptive debt collection acts. The Bankruptcy Code is the chapter of the federal statutes that governs bankruptcy and it includes a law, 11 USC 362, that provides an automatic stay against all collection activities by creditors against the debtor while the bankruptcy proceeding is ongoing. It is designed to give debtors a reprieve from the constant contact of creditors while they resolve their debt in the bankruptcy proceeding.
The debtor in the Davis case, Harvey Davis, filed two claims against NCO, a debt collection company, one in bankruptcy court alleging that NCO violated the automatic stay and another in general civil court for violation of the FDCPA by NCO. Both claims were based on the same conduct, harassing calls by NCO to Plaintiff’s business phone number that occurred after Davis had filed for bankruptcy.
NCO responded to the claims by arguing that the FDCPA claims should be dismissed because they were preempted by the Bankruptcy Code’s automatic stay provision. In other words, NCO argued that Davis couldn’t bring claims under both laws because the adversary complaint for automatic stay violation was his sole remedy.
The court disagreed with NCO and, after reviewing how other courts have ruled on the same issue, decided that both claims could proceed. Of course, Davis will still need to prove that his allegations against NCO are true.
In short, the Davis case is good news for debtors in the 11th Circuit which covers Alabama. However, not all circuits have found the same way so the outcome of a similar case would depend on where the bankruptcy case is filed.
Questions about Bankruptcy?
If you’d like to know more about the Davis case or bankruptcy generally, contact the Semmes Law Firm today.