Creditor Abuse After a Bankruptcy Filing
December 4th, 2009
A Washington State Bankruptcy court opened the doors to new laws to attack creditor abuse in the Ninth Circuit. In doing so, the Walls v. Wells Fargo no longer limits debtors to a discretionary “contempt remedy” by a bankruptcy judge for pursuing discharged debts against certain bill collectors. Rather, a strict liability lawsuit may also now be filed against certain debt collectors under state and federal law. The issue arises where a bankruptcy filing discharge has been entered and a new debt scavenger buys the discharged debt and attempts to collect. And yes, believe it or not, discharged debt is bought and sold on Wall Street all the time! While the Ninth Circuit Law has limited any remedy to going back to beg the bankruptcy judge for help, the new case from Washington makes the distinction that this is no longer necessary since a creditor-debtor relationship never existed. Instead, the debtor can now pursue the bill collector under the Federal Fair Debt Collections Practices Act and other State Collection Laws.
Entry Filed under: Business