Southern California Bankruptcy Law Blog

Fair Debt Collection Practices Act And Bankruptcy: Part II

Posted in Debt

FDCPA- Part IISome time ago I wrote in great detail about a split among the circuits over whether the Bankruptcy Code preempts the Fair Debt Collection Practices Act (“FDCPA”).

The gist of the split is over whether a debtor can simultaneously sue a creditor under both the Bankruptcy Code and the FDCPA for violating either the automatic stay of 11 U.S.C. § 362(a) or the discharge injunction of 11 U.S.C. § 524(a).

In my previous post I wrote that on the one hand the Seventh Circuit permits this sort of suit, reasoning that no federal statute preempts another federal statute absent a clear congressional statement, or the presence of an absurd result due to an irreconcilable conflict between the statutes.  See Randolph v. IMBS, Inc., 368 F. 3d 726 (7th Cir. 2004).  And on the other hand, the Ninth Circuit does not permit this sort of suit, holding that the debtor is only entitled to relief under the Bankruptcy Code.  See Walls v. Wells Fargo Bank, NA, 276 F. 3d 502 (9th Cir. 2002).  I also gave my reasons for thinking that the Walls decision was wrong.

Well the Second Circuit just held that there is no preemption, meaning that a debtor can get relief under both the Bankruptcy Code and the FDCPA against a violator.  See Garfield v. Ocwen Loan Servicing LLC, 2016 Westlaw 26631 (2d Cir.).

As with the Seventh Circuit’s Randolph holding the reasoning is sound.  It remains to be seen whether someone will take the circuit split to the Supremes for resolution.  In the meantime, if you’re in the Ninth Circuit ― like me ― you’ll just have to settle for relief under the Bankruptcy Code.

If you’re a debtor in the Central District of California who is facing a creditor who has violated either the automatic stay or the discharge injunction, call an excellent litigator to represent you in a suit against the offender.