Texas residents likely know that creditors generally cannot sue for the collection of debts once the statute of limitations has expired. However, courts have been divided as to whether or not filing a claim on a stale debt as part of a bankruptcy violates the Fair Debt Collection Practices Act. In May 2017, the Supreme Court ruled that it did not, reversing an 11th Circuit ruling.
The Supreme Court said that making a bankruptcy claim on expired debt was not false or misleading. This was because the obligation was still a claim when referring to bankruptcy law. The case began in 2014 when the debtor filed for Chapter 13 bankruptcy. A collection agency filed a claim on an unpaid credit card balance of $1,879.71. However, since the last transaction on the card had been made 10 years prior to the filing, it was beyond the applicable statute of limitations on credit card debt.
The court based its ruling on the fact that Alabama law says that a creditor still has a right to payment even if the statute of limitations to pursue a debt has expired. Under the bankruptcy law, a claim is basically a right to payment asserted by a creditor. Also, the Supreme Court found that there are no unfair means used by a creditor when filing a claim.
Individuals who are looking to reorganize their debts may be eligible to file for Chapter 13 bankruptcy. Generally, they are required to have a regular source of income in order to comply with the terms of a payment plan that must be approved by the court and which lasts for either three or five years. An attorney can provide more information on this particular chapter.