Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in dismissing for failure to state cause of action plaintiffs’ complaints alleging that defendant’s wage-garnishment actions violated Fair Debt Collection Practices Act (FDCPA) because they were filed in wrong venue. Ct. of Appeals found that instant wage-garnishment actions are actually proceedings against employer, as opposed to debtor, and thus are not covered proceedings under FDCPA.

Dist. Ct. did not err in granting creditor’s motion seeking to have defendants (wife and businesses controlled by debtor) deemed alter egos of debtor for purposes of having defendants’ assets turned over to debtor’s bankruptcy estate for purpose of distribution to debtor’s creditors. While defendants argued that Bankruptcy Ct. lacked authority to enter subsequent asset turnover order under 28 USC section 157(c)(1) because turnover issue was not “core proceeding,” and thus only Dist. Ct. could enter instant turnover order, Ct. of Appeals found that Bankruptcy Ct. could enter instant turnover order, because turnover of defendants’ assets to debtor’s estate and liquidation of assets for benefit of debtor’s creditors was “core proceeding” that could be considered by Bankruptcy Ct.

Dist. Courts did not err in granting defendants-debt collectors’ motions to dismiss plaintiff-debtors’ actions alleging that defendants’ actions in filing stale debts in their Chapter 13 bankruptcy proceedings violated sections 1692e and 1692f of Fair Debt Collective Practices Act (FDCPA). Record showed that plaintiffs successfully had said debts disallowed, and that said debts otherwise contained accurate information as to origin of debt and dates of last payment and last transaction. As such, Dist. Courts could properly conclude that act of filing stale claim in Chapter 13 bankruptcy proceeding did not violate FDCPA since instant proofs of claims were not false or misleading. Ct. rejected plaintiffs’ argument that filing stale debts falsely cloaks underlying obligation with air of legitimacy, or that filing of stale debt was deceptive practice because debtors at times fail to object to said claims. Result would be different had defendants filed stale debts that contained inaccurate information about said debts. (Dissent filed.)

Dist. Ct. erred in granting defendants’ motion for summary judgment in plaintiffs’ action alleging that defendants violated Fair Debt Collection Practices Act (FDCPA), when they sent collection letters demanding $46.50 in payment when plaintiffs failed to pay $1.50 parking fee, as well as $45 nonpayment penalty arising out of plaintiff’s use of defendant’s parking lot. While Dist. Ct. believed that instant unpaid parking fees and nonpayment penalties were not “debts” as contemplated under section 1692a(5) of FDCPA, Ct. of Appeals found that plaintiffs’ obligations arose out of contract law, and thus were debts covered by FDCPA. As such, Dist. Ct.’s analogy that instant fees were sufficiently akin to “fines” assessed for nonpayment at municipal parking meters was inapt since neither instant fees nor penalties arose from municipal ordinance.