Many Florida residents who are in debt to others are not aware that there is a statute of limitations regarding their obligations. After a certain period of time, an unpaid debt that has not been reaffirmed by the debtor becomes uncollectible. If a debtor files for bankruptcy, the owner of time-barred debt may be able to recover some money by filing a proof of claim. However, this practice is now under scrutiny by the U.S. Supreme Court.
The Supreme Court is expected to rule on the issue of whether debt collectors are violating the Fair Debt Collection Practices Act when they file proofs of claim for old debts. In many Chapter 13 bankruptcy cases, collectors are able to recover pennies on the dollar for unpaid debts, even though the debts are no longer valid because of a statute of limitations.
The reason old debts are often collected during a Chapter 13 bankruptcy is that no one involved in the bankruptcy case has any incentive to object to the collection attempt. Debtors will pay the same amount of money each month no matter how many creditors they have, and bankruptcy trustees do not have time to object to the thousands of invalid claims that they encounter in all of their cases. Other creditors do not object to the invalid claims because pursuing the issue usually costs more than it is worth to them.
Under Chapter 13, debts are repaid over a period lasting from three to five years pursuant to a court-approved plan. There are a variety of requirements that must be met before a person is permitted to file under this chapter, and an attorney can explain the process.