Cartoon of man with billA very recent Eleventh Circuit decision, Crawford v. LVNV Funding, LLC, No. 13-12389 (11th Cir., July 10, 2014), highlights an interesting split among the circuits, which makes things ripe for an appeal to the Supremes.

First let’s get a little background.

BACKGROUND

I.                The Automatic Stay And The Discharge Injunction

When a person files for bankruptcy protection, the automatic stay is triggered.  The stay prevents creditors from taking action against the debtor, the debtor’s possessions, and the bankruptcy estate that is created upon filing.  I have written about the automatic stay in many previous posts, so I won’t spend a lot of time exploring it here.

[T]he stay . . . continues until the earliest of —

(A) the time the case is closed;

(B) the time the case is dismissed; or

(C) if the case is a case under chapter 7 of this title concerning an individual or a case under chapter 9, 11, 12, or 13 of this title, the time a discharge is granted or denied.

11 U.S.C. § 362(c) (2).

If the debtor receives a discharge, then once the stay terminates it is replaced by the permanent discharge injunction of 11 U.S.C.  § 524(a), that forever prohibits creditors from attempting to collect discharged debts.

II.              The Fair Debt Collection Practices Act

The Bankruptcy Code is federal law, made pursuant to Congress’s enumerated power “to establish . . . uniform Laws on the subject of Bankruptcies throughout the United States.”  U.S. Const. art. I, § 8, cl. 4.  It affords debtors marvelous protections — including the automatic stay and the discharge injunction — against the depredations of their creditors.

Another federal law that protects debtors, in this case from debt collectors, is the Fair Debt Collection Practices Act (“FDCPA”) found in 15 U.S. Code § 1692, et seq.  The FDCPA contains significant limitations on what a debt collector can do.  By the way, the limitations here are not on the creditor, just on the collector.

III.            The Doctrine Of Federal Preemption

The U.S. Constitution contains the following provision:

This Constitution, and the Laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.

U.S. Const., art. VI, para. 2.

This means that federal laws are binding on everyone.  Thus, if there is a conflict between a federal statute and a state statute, the federal statute always wins.  This is sometimes referred to as the doctrine of federal preemption.

But notice what the Constitution does not say.  It does not say anything about the relationship between two federal statutes.  Therefore, if there were an inconsistency between two federal statutes, there is no formula for determining which statute controls.  And if there were no conflict between two federal statutes, there is no indication that one should be preferred above the other.

IV.            The Ninth Circuit’s Walls Decision

In 2002 the U.S. Court of Appeals for the Ninth Circuit issued a decision in Walls v. Wells Fargo Bank, N.A., 276 F. 3d 502 (9th Cir. 2002), that has created a problem for Ninth Circuit practitioners.
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This post gathers my thoughts on three eye openers.  Some were in the news, and some I experienced first-hand in my bankruptcy practice.  The common thread among these eye openers is a profound threat to the freedom and wellbeing of the citizenry.

I.          Debt Collector Abuses

A.        Whole Lotta Collectin’ Goin’ On

In the February 16, 2012 Los Angeles Times, Jim Puzzanghera reported on the recently formed Consumer Financial Protection Bureau and noted:

Debt collection has been second only to identity theft in consumer complaints to the Federal Trade Commission in recent years. The bureau estimated that 30 million Americans have debts in the collection process.

Thirty million!  Wow!  That’s one-tenth of the entire U.S. population.  So it’s not just my clients who are facing debt collection agencies and their corrupt and abusive tactics.  And given the volume of complaints it appears that abuses by debt collectors are widespread – it’s not just a few bad apples.
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In my last post I discussed reaffirmation of debts in bankruptcy.  Near the end of the post I described some loans I had seen my clients take out with interest rates as high as 496%.  At the end of the post I said that that loan shark rate was perfectly legal and promised to tell you why.  This post fulfills that promise by providing you with a bit of history.  I know, there’s no future in history – bad joke.  But this history may prove both enlightening and entertaining.

On April 20, 2005 President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) (uncharitably referred to by some as “BAPCraPA”).  BAPCPA made some sweeping changes to the Bankruptcy Code.  These changes affect not only debtors contemplating bankruptcy, but also attorneys – and not just bankruptcy practitioners.

I.          The Origins Of American Bankruptcy Law

Article 1, section 8 of the U.S. Constitution grants Congress the power:  “To establish . . . uniform rules on the subject of bankruptcies throughout the United States.”  Why did the Founders feel that it was necessary to include this power in the relatively short list of enumerated congressional powers?
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