Debtors in Texas and elsewhere are protected against certain actions of debt collectors. The federal law governing the actions of collectors is called the Fair Debt Collection Practices Act (FDCPA). Recently, the U.S. Court of Appeals for the 6th Circuit determined that the FDCPA prohibits certain activities of the debt collector, including state-required collection activities.
In a Michigan mortgage foreclosure case, a law firm handling the foreclosure was a debt collector for purposes of the FDCPA. Since it was a non-judicial foreclosure, no lawsuit was filed. The debtors disputed the debt and requested verification. Normally, under the FDCPA, a debt collector is required to cease most collection activities upon receipt of a bona fide dispute.
After the dispute letter was received, the law firm attached a notice of foreclosure sale to the debtor's home and had the notice of sale published. Both actions are required by state law for a foreclosure to move forward. The sale never occurred due to the debtor's subsequent bankruptcy. However, the debtors were permitted to file an action against the law firm for violations of the FDCPA.
The 6th Circuit reversed a decision of the lower court and determined a violation had occurred. Though the law firm argued that collection activities ended because the foreclosure never happened, the court found differently. It determined that under the plain meaning of the statute, publication of the sale and tacking a notice at the home of the debtors constituted collection activities.
Those in financial distress are often subjected to some unpleasant activities by debt collectors. The FDCPA was created to protect against more unscrupulous practices. In addition, bankruptcy protection was created to protect against impoverishment of an overwhelmed debtor. An experienced bankruptcy attorney can analyze the financial circumstances of a debtor and plot the best course of action to relieve his or her financial burdens.