Protect Your Assets: FDCPA and Bankruptcy

How can you protect you assets during a Chapter 7 or 13 bankruptcy case?
Picture of Stephen Dunne, Esq.

Stephen Dunne, Esq.

Philadelphia bankruptcy, credit report, and debt collection abuse attorney

How can you protect you assets during a Chapter 7 or 13 bankruptcy case?
Picture of Stephen Dunne, Esq.

Stephen Dunne, Esq.

Philadelphia bankruptcy, credit report, and debt collection abuse attorney

Today is the day.

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FDCPA Claims arising prior to filing a Bankruptcy Case

Potential claims for violations of the FDCPA or state debt collection law become property of the estate upon the filing of a petition for relief. See In re Cheaves, 2010 WL 4400048 (Bankr. M.D. Fla. Nov 8, 2010) (pre-petition claims for alleged violations of the FDCPA and the FCCPA are property of the bankruptcy estate and subject to administration by the trustee).

Any potential claims must be listed as an asset on the debtor’s schedule of personal property – Schedule B. Line 34 on Schedule B is used to list “Other Contingent and Unliquidated Claims of every Nature.” Here, the debtor should describe the claim as “Unliquidated FDCPA Claim against ABC Collection Agency.” The value of the cause of action must also be listed o the schedule.

The next step is to determine whether the debtor can remove the potential claim from the bankruptcy estate by exempting the claims using the state or federal exemption scheme. In most states, the debtor may use the federal “wild card” exemption, which can be used to exempt  any property. See 11 USC 522(d)(5). The “wild card” exemption is limited to $12,725.00.

Exemptions are listed on Schedule C – Property Claimed as Exempt. The current value of the property should be listed along with a discount for the likelihood of success.

Claims arising during a Bankruptcy Case

After filing for bankruptcy protection, the debtor, Mae Csondor received a letter from Weinstein regarding a $5,000 credit card debt. The letter demanded payment of the credit card debt in one lump sum.  See In re Csondor v. Weinstein, Trigger & Riley – 309 BR 124 (Bankr. E.D. Pa. 2004)

The debtor’s attorney filed a complaint against Weinstein under the Fair Debt Collection Practices Act (“FDCPA”) and the defendant moved to dismiss the case.

The Court’s analysis explains in detail how a debtor own’s their FDCPA lawsuit if it occurs post-petition. “The bankruptcy estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1).  The FDCPA claim in this case did not exist “as of the commencement of the case.” Rather, it arose after the bankruptcy was filed and thus will not impact the bankruptcy estate.   Any recovery under these claims would belong to the debtor and not her estate.

By analogy, the same outcome was observed by another bankruptcy court:

“Goldstein’s FDCPA claims are not within this court’s “related to” bankruptcy jurisdiction. Win, lose, or draw, the outcome of Goldstein’s FDCPA claims cannot “conceivably have any effect on the estate being administered in bankruptcy.” Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984). This is a Chapter 7 case. The FDCPA allegations involve post-petition conduct. Even if Goldstein were successfully to prosecute them, the recovery would be his, not his estate’s. See 11 U.S.C. § 541(a). The claims hold no potential to impact in any way the “handling and administration of the bankrupt estate.” Pacor, Inc., 743 F.2d at 994. See In re Goldstein, 201 B.R. 1, 5 (Bankr. D.Me.1996); see In re Steele, 258 B.R. 319, 322 (Bankr.D.N.H.2001) (holding that bankruptcy court lacked jurisdiction to rule on FDCPA and state law causes of action for post discharge injunction violation); 130 *130 McGlynn v. Credit Store, Inc., 234 B.R. 576, 584 (D.R.I.1999) (“Even if plaintiffs prevail on their FDCPA] claim, the recovery would belong to them, not to their respective estates.”); In re Reyes, 238 B.R. 507, 508 (Bankr.D.R.1.1999) (holding that bankruptcy court lacked jurisdiction to adjudicate post-petition state law claims); Buckingham v. Baptist Memorial Hosp., 283 B.R. 691, 693 (N.D.Miss. 2002) (holding that FDCPA and RICO claims were not “related to” the estate because they all dealt with post-petition conduct and any recovery would go to the plaintiff and would have no conceivable effect on the estate); In re Vogt, 257 B.R. 65, 68 (Bankr.D.Colo.2000) (holding that bankruptcy court’s limited jurisdiction prevents it from ruling on debtor’s post-discharge FDCPA claim); In re Close, 2003 WL 22697825 *4 (Bankr.E.D.Pa.) (holding that bankruptcy court lacked subject matter jurisdiction even over UDAP claims arising out of violation of discharge injunction). Because the Complaint raises claims grounded in independent Federal and state laws and arising from post-petition conduct, they are not “related” to this bankruptcy for purposes of jurisdiction.”

Claims arising after a Bankruptcy Case

Debt collection abuse claims that arise after a discharge has entered in either a chapter 7 or chapter 13 are not property of the estate.

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