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Fair Debt Collection: 16.2.3.3.6 Child support collectors

Some states have special provisions covering private collectors of child support, or explicitly subjecting them to the provisions of general debt collection statutes.177 Many of these statutes focus primarily on preventing collectors from taking advantage of vulnerable obligees, but they may also set limits on debt collection tactics.

Fair Debt Collection: 16.2.3.3.7 Out-of-state collectors

Some debt collection statutes apply to out-of-state debt collectors who collect debts from residents of the legislating states.178 Consumers being dunned by an out-of-state collector may also be protected by the debt collection laws of the collector’s home state.179 Other state debt collection statutes, however, exclude interstate communications.180

Fair Debt Collection: 11.11.4.1 Generally

While new defense tactics continually arise, two longstanding and frequent strategies to attempt to derail class actions are: (1) to make offers of settlement or judgment to the class representatives individually prior to certification of the class in the hope of mooting their claim and (2) to file counterclaims. These topics, as well as the less frequent maneuver of seeking a ruling on the merits prior to class certification, are discussed immediately below.

Fair Debt Collection: 11.13.5 Tax Consequences of Attorney Fee Awards

An attorney fee award may have consequences for the consumer, even if the consumer hands over the full attorney fee award to the attorney. The general rule is that the fee award is taxable income to the consumer even in that case, although there are several exceptions that often apply.

Fair Debt Collection: 14.11.1 Overview

Occasionally state or local officials are involved in debt collection abuse. This can occur either because the state itself is the creditor or because a private creditor manages to enlist an official’s aid in collecting the debt. Where officials are involved, they and the private parties with whom they act may be subject to liability under 42 U.S.C. § 1983.

Fair Debt Collection: 14.11.2.1 Government Officials As State Actors

The first question is whether there is sufficient state action to make section 1983 applicable. State officials are state actors when they are exercising power possessed by virtue of state law and made possible by their state authority.611 Abuse of authority by a state official is state action, even if it is illegal under state law.612

Fair Debt Collection: 14.11.2.2 Private Parties

With respect to private parties, the existence of state action depends on whether the conduct causing the deprivation of the federal right is “fairly attributable” to the state.618 Willful participation in joint activity with the state or its agents is sufficient to make a private party a state actor.619

Fair Debt Collection: 14.11.2.3 The State As Creditor

When the state is the creditor, its seizure of the debtor’s property, through intercept or other means, without adequate notice and an opportunity to be heard may deprive the debtor of due process.637 The same is true as to imprisonment of a consumer for failure to pay a fine without an opportunity to show the inability to pay.638

Fair Debt Collection: 14.11.3 What Protections Due Process Requires

If there is state action, the Fourteenth Amendment prohibits the deprivation of liberty or property without due process of law. Even a mere possessory interest in property invokes procedural due process protections.644 However, there must be an actual deprivation of liberty or property before due process rights attach.645

Fair Debt Collection: 14.11.4 Fourth Amendment Claims

The Fourth Amendment right to be free from unreasonable searches and seizures applies in the civil as well as the criminal context and can be the basis of a section 1983 complaint where the state actors have either seized property or intruded upon private property.654 If a consumer abandons personal property, or turns it over to a creditor, in response to an officer’s threat of unlawful arrest, this is a seizure.655 If state officials enter a home or its immediate surroundings to search for and

Fair Debt Collection: 14.11.5 Immunity; Municipal Liability

State officials can claim immunity from liability under section 1983 if their conduct did not violate clearly established statutory or constitutional rights of which a reasonable person would have known.663 In addition, some actors such as judicial officials have absolute immunity.664 Private parties cannot claim qualified good faith immunity,665 but some courts have allowed them to raise good faith as an affirmative defense.

Consumer Bankruptcy Law and Practice: 17.1.1.2 Purpose of Chapter 12

Chapter 12 is a powerful reorganization tool for eligible debtors, providing authority for debt reduction that exceeds what can be accomplished in either a chapter 11 or 13 bankruptcy. However, it is not a panacea for family farmers’ or fishermen’s economic woes. It provides a specific limited remedy that will help some but not all of those eligible. Attorneys must analyze each situation to determine if their client is eligible for chapter 12 and, if so, whether filing is the most appropriate remedy.

Consumer Bankruptcy Law and Practice: 17.1.2 Special Bankruptcy Code Protections Outside of Chapter 12

Early on, Congress acknowledged special circumstances that justify at least minimal protection for farmers experiencing financial distress. This protection initially came in the form of a limitation on a creditor’s right to force the farmer-debtor into bankruptcy. As early as the Bankruptcy Act of 1898 creditors of a “person engaged chiefly in farming or in tillage of soil” were prevented from forcing that person into an involuntary bankruptcy.7 This protection against involuntary bankruptcy remains the law today.

Consumer Bankruptcy Law and Practice: 17.1.3.1 Generally

Before the creation of chapter 12, family farmer reorganization options were limited to chapters 11 and 13. These two options are still available to family farmers who qualify; family farmers are not compelled to use chapter 12 to reorganize.21 In most cases, however, chapter 12 is the preferred option. Chapters 11 and 13 were not constructed with the special needs of the farmer debtor in mind and both provide significant barriers to farmer reorganization.

Consumer Bankruptcy Law and Practice: 17.1.4.2 The Farm Credit System

The Farm Credit System (FCS) is a network of federally chartered borrower-owned cooperatives that was specifically created to provide a competitive source of agricultural credit.48 It now stands as the largest competitor to commercial banks, holding the second largest portfolio of outstanding agricultural loans.

Consumer Bankruptcy Law and Practice: 17.1.4.3 The Farm Service Agency Loan Programs

The Farm Service Agency (FSA), formerly the Farmers Home Administration (FmHA), is a federal agency within the United States Department of Agriculture (USDA) that was created expressly for the purpose of providing loans to family farmers that are unable to obtain credit from conventional sources.50 FSA farm loan programs also target certain groups by reserving a portion of loan funding for use by socially disadvantaged (SDA) family farmers and beginning farmers.51 FSA’s mission recognizes imperfecti

Consumer Bankruptcy Law and Practice: 17.2.2.4.2 Debt ceiling

A family farmer’s “aggregate debts” cannot exceed $11,097,350.131 This maximum amount is adjusted every three years based on the Consumer Price Index.132 The same debt ceiling applies to family farm corporations and partnerships.133 In a joint case the aggregate debt ceiling applies to both an individual and their spouse together.

Consumer Bankruptcy Law and Practice: 17.2.2.4.3 Debt arising from the farm operation or commercial fishing operation

Another requirement for individual “family farmer” status is that at least fifty percent of the debtor’s aggregate noncontingent liquidated debt must arise from the farming operation owned or operated by the farmer.146 A debt for the debtor’s principal residence is excluded from this computation unless the debt arises out of the farming operation.147 The same requirement applies to partnerships and corporations.148

Consumer Bankruptcy Law and Practice: 17.2.2.4.4 Income arising from the farming operation or the commercial fishing operation

In order to be a “family farmer,” an individual or married couple must have received at least fifty percent of their gross income from the farming operation, either in the taxable year immediately preceding the tax year in which the bankruptcy petition is filed or in each of the second and third taxable years preceding the year of filing.154 This fifty percent income requirement does not apply to farm partnerships or corporations.155