Consumers who make the difficult decision to file for bankruptcy face many challenges. In some cases, one of those difficulties may be posed by aggressive debt collectors. In one New Jersey case, a collector’s letter, which contained numerous alleged defects in violation of federal debt collection laws, placed it in hot water when the 3d Circuit ruled that the Bankruptcy Code did not prevent the debtors from pursuing a debt collection practices claim, even though the debt at issue was part of the bankruptcy.

Robert and Stacey Simon filed for Chapter 7 bankruptcy in December 2010. In January 2011, the couple received a letter from the law firm of Weinstein & Riley P.S., on behalf of a collection agency, FIA Card Services N.A., attempting to collect on an unsecured credit card debt. The letter threatened that FIA would pursue an adversary proceeding in the Simons’ bankruptcy unless they stipulated that the credit card debt was non-dischargeable or agreed to pay an amount in settlement of the debt. The letter also scheduled an examination of the debtors in order to allow FIA to gather information for its potential adversary proceeding.

Based upon several procedural defects in the letter, the couple launched a Fair Debt Collection Practices Act (FDCPA) claim against the collection agency and its law firm. The Bankruptcy Court ruled that it lacked jurisdiction over the alleged transgression, and the federal District Court determined that the bankruptcy laws precluded the couple’s action.

The 3d Circuit decided otherwise. The court noted that several circuits had reached the opposite conclusion, including the 9th and 2d Circuits. The 3d Circuit rejected the 9th Circuit approach, which holds that the Bankruptcy Code bars FDCPA claims across the board. “The proper inquiry … is whether the FDCPA claim raises a direct conflict between the Code or Rules and the FDCPA, or whether both can be enforced,” the court explained. In other words, the debtor is only prohibited from pursuing a FDCPA claim if complying with that law would necessarily lead a debt collector to violate bankruptcy rules. Because the claims the Simons made did not create an inherent conflict between the requirements of the FDCPA and the bankruptcy code, the law permitted them to pursue their claim, the 3d Circuit ruled.

Filers in California and throughout the 9th Circuit currently face much less favorable conditions than the Simons when they receive debt collection letters that violate the FDCPA. However, given the lack of uniformity, as seen by the rulings by the 2d and 9th Circuits in contrast to the 3d and 7th Circuits, the area could eventually produce further litigation to clarify this uncertain area.

A debtor’s action to file bankruptcy may produce several reactions among creditors, as they position themselves to try to collect the maximum amount they can. This is but one of many intricate challenges facing filers. To make sure you have the advice and assistance you need to get through your bankruptcy, contact the Bay Area bankruptcy attorneys at the Law Offices of Melanie Tavare. Oakland bankruptcy attorney Melanie Tavare has helped numerous clients with Chapter 7 and Chapter 13 bankruptcies, and can help you better understand your rights and responsibilities as you go through the bankruptcy proces. Call (510) 255-4646 for your free consultation today.

The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code