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Court ruling may expand definition of consumer in debt cases

On Behalf of | Oct 29, 2018 | Bankruptcy

Some people in Texas might be interested in the recent decision in a legal case involving a consumer who said he did not owe the debt issued by a credit card company. The man filed a lawsuit against Main Street Acquisition Corporation that alleged that the company had violated the Fair Debt Collection Practices Act.

Main Street had purchased the charged-off debt that was in the plaintiff’s name. However, the plaintiff’s lawsuit said that he did not owe the debt and that the attempts to collect the debt were time-barred. The district court dismissed the lawsuit on the grounds that the man could not be considered a “consumer.” The court reached this decision because it said a consumer was someone who was obligated to repay a debt, and the man said that he was not.

However, the U.S. Court of Appeals for the Seventh Circuit disagreed. It expanded the definition of “consumer” to include the person that the collector said was obligated to pay the debt. In other words, according to that court’s decision, the consumer could be defined by either the debtor or the collector. The court ruled that there was precedent for this decision and that it also was consistent with the FDCPA since its primary concern was with the behavior of debt collectors and not consumers.

While there can be errors of this nature in which a creditor attempts to collect misapplied debt, people are more likely to struggle with debt that does belong to them. A debtor can file for Chapter 7 or Chapter 13 bankruptcy. With Chapter 7, a person can declare a small number of assets exempt, and all eligible debts may be discharged. Chapter 13 may allow a debtor to keep assets such as a home and work out a payment plan with creditors.