In a recent Supreme Court case—Midland Funding, LLC. V. Johnson, No. 16-348—the court declared that the statute of limitations doesn’t necessarily bar a creditor from seeking payment for an obligation through a bankruptcy claim.
The case began when Midland Funding filed a claim to collect a $1,900 credit-card debt from Aleida Johnson. Although Midland’s claim was originally dismissed, Johnson then sued Midland for trying to collect the debt after the statute of limitations had expired. The court’s decision ruled that Johnson was still subject to Midland’s claim under the Debt Collection Act, allowing the statute of limitations to be violated.
The case shows that filing bankruptcy claims on outdated debt does not violate the Fair Debt Collection Practices Act (FDCPA), which “protects consumers by preventing consumer bankruptcies”.
The victory for Midland highlights the practice of the debt collecting industry, where firms file thousands of outdated bankruptcy claims in hopes that debtors will pay their obligations. With 3,805.6 billion USD of outstanding consumer credit in the US as of March 2017, debt acquisition services will continue filing these claims now that they have the green light from the courts (federalreserve.gov).