The U.S. Supreme Court is currently deciding a case that could change how harshly debt collectors will be penalized after they pursue a debt that a person is no longer is legally obligated to pay. More specifically, the court will be deciding whether debt collectors should be given some leniency in fighting fines imposed on them from pursuing collections after a consumer has received a bankruptcy discharge on a debt.
Consumer advocates worry that the case could weaken protections for Americans that file for bankruptcy protection. Debt collectors are arguing that it is not that easy to see that a debt has been discharged, especially in cases where the law does not allow for a debt to be discharged.
For the most part, bankruptcy rules are fairly strict on creditors pursuing collection on a debt that has been discharged in a bankruptcy. If a creditor has received notification of a bankruptcy discharge but still tries to collect on that discharged debt, the creditor can be held in contempt and face serious fines.
Oral arguments were heard before the U.S. Supreme Court justices on Wednesday from both sides. It is estimated that approximately 750,000 consumers were successfully able to receive a bankruptcy discharge in the twelve months immediately preceding September 30, 2018. However, after these individuals received their discharge, no one tracks just how many debt collectors continue to pursue any debt that was discharged for these individuals in bankruptcy.
One of the major concerns brought up by Chief Justice John Roberts had to do with who would be the responsible party for showing that a debt collector knew about a bankruptcy filing, as well as who would be paying for legal disputes over alleged violations. The Chief Justice made a statement to the effect that it should be on the creditor to bear the risk of making the decision on whether to proceed on a debt, including the cost of legal fees.
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