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Fair Debt Collection: 13.3.2.3 When Standing Problems Cannot Be Avoided

If the trustee does not abandon the debt collection claim, the court will likely find that the bankruptcy trustee, rather than the consumer plaintiff, has standing to pursue the claim. In this instance, dismissal of the lawsuit is the least appropriate option for the court to choose. The court should allow for substitution of the trustee as plaintiff.185 The reference to “standing” in this context is actually something of a misnomer.

Fair Debt Collection: 13.3.3.1 Generally

Judicial estoppel is another doctrine that courts apply in situations where a plaintiff brings a consumer claim that existed at the time of a prior bankruptcy case, but did not disclose the claim in the schedules filed with the bankruptcy court. Judicial estoppel and lack of standing are related in that both can be consequences of an omitting a preexisting legal claim from bankruptcy schedules.

Fair Debt Collection: 13.3.3.3 Amending Bankruptcy Schedules to Avoid Judicial Estoppel

As with the standing problem, the plaintiff can seek to reopen a closed bankruptcy case, file an amended schedule listing the debt collection claim, and have the claim exempted, administered, or abandoned.224 The defendant in the postbankruptcy action does not have standing to challenge the debtor’s proceeding to reopen the bankruptcy case.225 If the action is taken promptly and there is no evidence of bad faith, the court should decline to impose judicial estopp

Fair Debt Collection: 13.4.1 Claims Arising During a Bankruptcy Case

Debt collection claims may arise after a bankruptcy case is filed, but before a discharge is entered in the case. In chapter 7 cases that time period is about four months and in chapter 13 cases it can be three to five years. For example, a creditor that initiates a lawsuit over a prepetition debt after the debtor has filed for bankruptcy, but before discharge, potentially violates both the automatic stay and the FDCPA.

Fair Debt Collection: 13.2.2 Chapter 13 Overview

A case filed under chapter 13 is often called a “reorganization” because it provides for the “adjustment of debts.” Unlike chapter 7, chapter 13 gives debtors the opportunity to adjust their financial affairs without having to liquidate their non-exempt assets.14 In a chapter 13 case, the debtor submits a plan to repay creditors all or part of the money owed to them over a three to five year period.15 If the proposed plan meets the requirements set out in the Bankruptcy Code, it must be confirmed by

Fair Debt Collection: 13.2.4 The Automatic Stay

The automatic stay is a fundamental cornerstone of the bankruptcy system.36 In most cases,37 it is triggered instantly upon the filing of a bankruptcy petition.38 The main purpose of the automatic stay is to protect the debtor39 and the debtor’s property and to allow the bankruptcy court to deal with the debtor’s situation in an orderly manner.

Fair Debt Collection: 13.2.6 Discharge

The ultimate goal of most consumer bankruptcies is the discharge, which frees the debtor from personal liability on almost all debts.88 It is this clean slate that normally gives debtors the fresh start that bankruptcy is meant to provide. However, under limited circumstances the court may deny a discharge, or the discharge may be inapplicable to some debts.

Fair Debt Collection: 13.3.2.1 Generally

A consumer’s failure to disclose a legal claim in bankruptcy schedules can create a significant problem in later litigation. When a prebankruptcy asset is unscheduled, it is never administered, exempted, or abandoned. Instead, it remains property of the bankruptcy estate.

Home Foreclosures: 17.4.2.2.3 The consumer’s tender obligation

It is important to remember that a homeowner who seeks rescission must be prepared to pay back their gains from the transaction. This is called the consumer’s “tender” obligation and arises if the creditor paid off the original mortgage or brought it current, or provided the homeowner with cash. But the consumer should be able to credit any payments made to the rescuer—whether in the form of rent payments, finance charges, closing costs, or other disguised fees or payments—because rescission voids the original obligation to pay those costs.

Fair Credit Reporting: 7.2.3.4.1 Introduction

A consumer report may be used “in connection with a credit transaction involving the consumer . . . and involving . . . collection of an account of [] the consumer.”173 Some consumers may be confused or not be familiar with the party accessing their consumer reports because collection is often done by third-party debt collectors.

Fair Credit Reporting: 7.2.8.2.3 Initiated by the consumer

The business transaction must be “initiated by the consumer.”372 Prior to the 1996 Reform Act amendments, the business transaction needed only to “involve” the consumer.373 The language now makes clear that the consumer must at least evidence interest in a transaction and perhaps take an explicit first step to initiate the transaction in order for the business to have a legitimate permissible use of a consumer report.

Fair Credit Reporting: 7.5.1.1 Two Separate Obligations Imposed on CRAs

Consumer reporting agencies have two separate obligations concerning when they can release consumer reports to users, and they should be liable under the FCRA for failing to comply with either provision.

First, CRAs cannot release consumer reports for impermissible purposes, and both negligent and willful violations of this requirement are actionable under the Act.653

Fair Credit Reporting: 7.5.2a Procedures Ensuring Information Pertains to the Correct Consumer

A permissible purpose is specific to the consumer who is the subject of the user’s request.693 If a CRA issues a report that includes information on multiple consumers, it lacks a permissible purpose.694 The CFPB has clarified that providing a disclaimer stating that the report may not belong to the specific consumer and that further review is required does not cure the CRA’s failure to satisfy the permis

Fair Credit Reporting: 7.7.1 Overview

Notwithstanding the consumer reporting agency’s reasonable efforts to verify the user’s identification and purpose for requesting information, some users will obtain consumer reports through misrepresentation. In light of the difficulty which the CRA may have in discovering fictitious creditors, it may be that the consumer will have more success suing the user than the CRA.

Fair Credit Reporting: 7.1.2.2 The “Reason to Believe” Standard

In general, a consumer reporting agency (CRA) may release a report whenever the CRA “has reason to believe” that the user intends to use the information for a permissible purpose.21 However, when a CRA has a reason to believe that the information may be used for an impermissible purpose, it has a duty to take additional steps to ensure that the user has a permissible purpose.22 This “reason to believe” language only prefaces some of the listed permissible purposes, but the other permissible purposes

Consumer Banking and Payments Law: 9.1 Overview

This chapter examines five different ways that individuals can receive Social Security, Supplemental Security Income (SSI), and other federal benefits. The chapter sets out advantages and disadvantages of the different ways and the legal limits and rights under each method of receiving federal benefit payments: