A typical bankruptcy begins when someone files a petition. With some exceptions, the property belonging to that person will be used to pay creditors. In order for a creditor to receive payment it must file a proof of claim. If the proof of claim is inaccurate, then the person filing bankruptcy can object. A judge will then decide whether the creditor can be paid.
A problem arises when a claim is filed in bankruptcy on a stale debt or time-barred debt. For example, assume you owe a credit card debt that is more than five (5) years old. This debt is barred by the statute of limitations. If the credit card company claims the debts in bankruptcy, then the debtor can file an objection. The most likely result is that the credit card company will not be paid. However, no objection is filed, then the credit card company will receive payment. This creates an incentive to file claims even when a debt is barred by the statute of limitations.
Not all bankruptcy courts agree on how to deal with this problem. Several take the position that it is the responsibility of the debtor to file an objection. However, this means extra work for the debtor without any compensation for dealing with frivolous claims. Luckily, the Eleventh Circuit Court of Appeals (which includes Florida) has taken a different approach. They ruled that claims based on stale debts barred by the statute of limitations are violations of the Fair Debt Collection Practices Act (“FDCPA”). The FDCPAprovides significant advantages because it allows the debtor to collect actual damages, up to $1,000 in statutory damages, and attorney’s fees and costs. Putting the power back in the hands of the person filing Chapter 7 or Chapter 13 bankruptcy.
However, these issues can be extremely complicated. You should only hire the best and most experienced bankruptcy attorney to help you with a Chapter 7 or Chapter 13 bankruptcy.