Midland Funding LLC v. Johnson: OK to file Proof of Claim on Time Barred Debt

Today, May 15, 2017, the Supreme Court of the United States decided Midland Funding, LLC v. Johnson, 581 U.S. ___ (2017).

Holding: The filing of a proof of claim that is obviously time barred is not a false, deceptive, misleading, unfair or unconscionable debt-collection practice within the meaning of the Fair Debt Collection Practices Act.

Midland Funding filed a proof of claim in Johnson’s Chapter 13 bankruptcy case. It asserted that Johnson owed Midland debt on a credit card. The last time any charge appeared on Johnson’s account was more than 10 years ago. The relevant statute of limitations under Alabama law is six years. Johnson objected to the claim, and the Bankruptcy Court disallowed it.

Johnson sued Midland, claiming that its filing a proof of claim on an obviously time-barred debt was “false,” “deceptive,” “misleading,” “unconscionable,” and “unfair” within the meaning of the Fair Debt Collection Practices Act, 15 U. S. C. §§1692e, 1692f. The District Court held that the Act did not apply and dismissed the suit. The Eleventh Circuit reversed. The Supreme Court reversed, holding the filing of a proof of claim on a time barred debt is not a false, deceptive, misleading, unfair or unconscionable debt collection within the meaning of the Fair Debt Collection Practices Act.

While the decision has not been published yet, the Syllabus containing the decision can be viewed at https://www.supremecourt.gov/opinions/16pdf/16-348_h315.pdf

Bankruptcy Fees Likely to Increase in 2017

According to President Trump's budget proposal, the filing for bankruptcy would likely cost more.

The budget includes a provision that would raise an additional $150 million in 2017 through higher filing fees. The budget aims to generate an additional $150 million in 2017, and $289 million in 2018, in addition to the $138 million already generated.

Although it is too early to know which filing fees will increase, the increased fees would go to the Department of Justice's United States Trustee Program. The Trustees oversee bankruptcy filings.
Currently, the filing fee for Chapter 7 bankruptcy, the most common type of petition, is $335. Other filing fees range from $310 for Chapter 13 to $1,717 for Chapters 9, 11 and 15. Additional costs come from attorney's fees and required financial counseling.

It will be interesting to see if anyone challenges the fee on the basis of restricting access to the Courts. Should this pass, it will be interesting to see how much of an increase in filing of fee waiver applications.

So, what are the fees now?  Let's take a look.

According to President Trump's budget proposal, the filing for bankruptcy would likely cost more.
The budget includes a provision that would raise an additional $150 million in 2017 through higher filing fees. The budget aims to generate an additional $150 million in 2017, and $289 million in 2018, in addition to the $138 million already generated.
Although it is too early to know which filing fees will increase, the increased fees would go to the Department of Justice's United States Trustee Program. The Trustees oversee bankruptcy filings.
Currently, the filing fee for Chapter 7 bankruptcy, the most common type of petition, is $335. Other filing fees range from $310 for Chapter 13 to $1,717 for Chapters 9, 11 and 15. Additional costs come from attorney's fees and required financial counseling.
It will be interesting to see if anyone challenges the fee on the basis of restricting access to the Courts. Should this pass, it will be interesting to see the increase in the filing of fee waiver applications.
So, how much does it currently cost to file Let's take a look.

New Petition Filing Fees (as of 3/18/2017)
Chapter 7 Voluntary or Involuntary
$ 335.00 [$245 filing fee + $75 administrative fee + $15 trustee surcharge]

Chapter 9
$1,717.00 [$1167 filing fee + $550 administrative fee]

Chapter 11 Voluntary or Involuntary
$1,717.00 [$1167 filing fee + $550 administrative fee]

Chapter 12
$ 275.00 [$200 filing fee + $75 administrative fee]

Chapter 13
$ 310.00 [$235 filing fee + $75 administrative fee]

Chapter 15
$1,717.00 [$1167 filing fee + $550 administrative fee]

Bankruptcy: An Effective Social Policy That Reduces Stress, Live Longer

Over the past 15 years or so, people have come into my office to file bankruptcy for many different reasons.  While no 2 bankruptcies are the same, they generally wind up falling into one of two distinctive categories: financial or debt relief, and relief for medical reasons.

While the first of these 2 categories may seem obvious, as that is what is disseminated through the various news agencies, the other is rarely, if ever, mentioned.  Financial or debt relief is obvious, and is centered around the construction, and reconstruction, of the bankruptcy code, its rules, and most case law, while the two are actually inextricably intertwined.  The other being medical, does not appear to have been contemplated  by congress.

There are two forces at work here.  The first is on the debt collection side.  They are either trying to collect on money lent to the debtor, or collecting on moneys owed to the creditor for some other reason, such as a judgment.  The creditor simply wants to be paid moneys owed to them, and when the debt is beyond a debtor's means of being able to pay, the debtor is forced to look at other means of relief, such as bankruptcy.

The other construct being medical, is almost exclusively from the debtor's side.  Collection efforts are initiated with little regard to a particular debtor's circumstances.  A debtor may have medical bills resulting from heart or blood pressure issues, or the debtor may have unresolved mental issues.  The tactics used by debt collectors push people to resort to legal remedies, including bankruptcy, to reduce stress, lower blood pressure, and conform mentally with doctor's recommendations.

According to a paper released by the National Bureau of Economic Research, "economists Will Dobbie and Jae Song examine 500,000 bankruptcy filings in the United States to measure the effect of bankruptcy laws on consumers. They found that the bankruptcy code is an incredibly effective social insurance policy. According to their findings, getting approved for Chapter 13 bankruptcy protection 'increases annual earnings by $5,562, decreases five-year mortality by 1.2 percentage points, and decreases five-year foreclosure rates by 19.1 percentage points.'"

"The paper's authors argue that bankruptcy protection helps workers earn more by removing the disincentive to work resulting from creditors garnishing worker's paychecks. If a person's wages are garnished to the point that it didn't pay to continue working, they often decide to stop working altogether.

The study also found that bankruptcy also helps people live longer, due likely to the fact that dealing with debt problems, rather then letting them fester, significantly reduces stress. Chapter 13 bankruptcy also allows people to stay in their homes because it is designed specifically to allow borrowers to avoid foreclosure."

To read the complete article, see bankruptcy-law-inequality-income

Lee Ann Bennett Appointed To Administrative Office of US Courts

Congratulations to Lee Ann Bennett in her appointment by Supreme Court Chief Justice John G. Roberts, Jr. as the new deputy director of the Administrative Office of the U.S. Courts.  Bennett will serve as deputy to AO Director James C. Duff.  On behalf of the bankruptcy attorneys that practice in the Middle District of Florida, Jacksonville Division, we thank her for a job well done, and wish her much success in her new job.


For more information, see

http://www.uscourts.gov/news/2017/02/23/new-ao-deputy-director-named

Supreme Court Grants Cert on FDCPA Case

The Supreme Court today granted certiorari in the case of Midland Funding, LLC. v. Johnson, No. 16-348, in which the Eleventh Circuit found that not only does a proof of claim on a time-barred debt violate the FDCPA, but the FDCPA claim is not in conflict with, nor is it precluded by, the Bankruptcy Code.

NEW Chapter 13 Form Plan for Middle District of Florida

Note:  Effective September 2, 2016, an updated Chapter 13 Plan has been implemented in the Middle District of Florida.  You can see the form at the following link: 

http://www.flmb.uscourts.gov/procedures/documents/Chapter13Plan.pdf

Scams After Mass Shooting

 

From Better Business Bureau
Arlington, VA – In the wake of the largest mass shooting in U.S. history, the BBB Serving Central Florida and the BBB Wise Giving Alliance, the national charity monitoring arm of the Better Business Bureau, caution donors about potential red flags in fund raising to help Orlando victims and their families, and to be aware of the different circumstances that often emerge in tragedy-related philanthropy.

“Tragedy inspires people to give, and this terrible tragedy is drawing incredible response already from people all around the world” said H. Art Taylor, President & CEO, BBB Wise Giving Alliance “The best way to help the victims, their families, and the people of Orlando is to make sure that donations end up where they belong. We are already hearing about click-bait schemes and questionable solicitations, and we expect there will be numerous scams and frauds. We urge those generous donors to give wisely so their gifts can do the most good.”

Holly Salmons, President & CEO of the Better Business Bureau Serving Central Florida, notes that “The world has rushed to support the City Beautiful and the victims on this heinous crime. We encourage those who want to show their support through donations to do so with caution. Scammers depend on heightened emotion and often follow closely behind tragic events.”

BBB Wise Giving Alliance urges donors to give thoughtfully and avoid those seeking to take advantage of the generosity of others. Here are “Ten Tips for Giving with Confidence” –

1. Thoughtful Giving
Take the time to check out the charity to avoid wasting your generosity by donating to a questionable or poorly managed effort. The first request for a donation may not be the best choice. Be proactive and find trusted charities that are providing assistance.

2. Government Registration
About 40 of the 50 states in the U.S. require charities to register with a state government agency (usually a division of the State Attorney General’s office) before they solicit for charitable gifts (in Canada, charities register with the Canada Revenue Agency.) If the charity is not registered, that may be a significant red flag.

3. Respecting Victims and Their Families
Organizations raising funds should get permission from the families to use either the names of the victims and/or any photographs of them. Some charities raising funds for the Colorado movie theater victims did not do this and were the subject of criticism from victims’ families.

4. How Will Donations Be Used?
Watch out for vague appeals that don’t identify the intended use of funds. For example, how will the donations help victims’ families? Also, unless told otherwise, donors will assume that funds collected quickly in the wake of a tragedy will be spent just as quickly. See if the appeal identifies when the collected funds will be used.

5. What if a Family Sets Up Its Own Assistance Fund?
Some families may decide to set up their own assistance funds. Be mindful that such funds may not be set up as charities. Also, make sure that collected monies are received and administered by a third party such as a bank, CPA or lawyer. This will help provide oversight and ensure the collected funds are used appropriately (e.g., paying for funeral costs, counseling, and other tragedy-related needs.)

6. Advocacy Organizations
Tragedies that involve violent acts with firearms can also generate requests from a variety of advocacy organizations that address gun use. Donors can support these efforts as well but note that some of these advocacy groups are not tax exempt as charities. Also, watch out for newly created advocacy groups that will be difficult to check out.

7. Online Cautions
Never click on links to charities on unfamiliar websites or in texts or emails. These may take you to a lookalike website where you will be asked to provide personal financial information or to click on something that downloads harmful malware into your computer. Don’t assume that charity recommendations on Facebook, blogs or other social media have already been vetted.

8. Financial Transparency
After funds are raised for a tragedy, it is even more important for organizations to provide an accounting of how funds were spent. Transparent organizations will post this information on their websites so that anyone can find out and not have to wait until the audited financial statements are available sometime in the future.

9. Newly Created or Established Organizations
This is a personal giving choice, but an established charity will more likely have the experience to quickly address the circumstances and have a track record that can be evaluated. A newly formed organization may be well-meaning but will be difficult to check out and may not be well managed.

10. Tax Deductibility
Not all organizations collecting funds to assist this tragedy are tax exempt as charities under section 501(c)(3) of the Internal Revenue Code in the U.S. (the equivalent in Canada are charities registered with the Canada Revenue Agency). Donors can support these other entities but keep this in mind if they want to take a deduction for income tax purposes. In addition, contributions that are donor-restricted to help a specific individual/family are not deductible in the U.S. as charitable donations, even if the recipient organization is a charity.