Monday, February 16, 2015

FDCPA: Consumer Lacked Standing to Bring Pre-petition Consumer Claim.

Barris v. Midland Funding LLC, C.A. No. 14-cv-6469 (D.N.J. Fe. 9, 2015) serves as a reminder that bankruptcy can divest a consumer of its standing to bring an FDCPA claim.  In Barris, the consumer discovered Midland had re-reported a disputed debt on her consumer report without notating the dispute.  The plaintiff the filed a Chapter 7 bankruptcy and failed to list the claim as an asset.  After receiving her discharge, plaintiff brought suit alleging that Midland’s credit reporting violated the FDCPA.  Midland filed a motion to dismiss, challenging the plaintiff’s standing to sue.  In Chapter 7s, the pre-petition claim becomes property of the estate and the trustee has standing- not the debtor- to pursue it unless the trustee has abandoned the claim.  The court agreed with Midland, holding that the debtor lacked standing to bring a cause of action for a pre-petition claim that was not disclosed in the bankruptcy because pre-petition claims belong to the bankruptcy trustee.  The court pointed out that “[u]nscheduled property…can never be abandoned without…notice and hearing” and concluded that “[t]he Trustee has exclusive authority to dispose of or control property of the bankruptcy estate” including Barris’ claim against Midland.  The case serves as a great reminder that defense counsel should always be aware of whether or not the consumer has filed bankruptcy and if so, whether or not the claim (if prepetition) was disclosed in the consumer’s schedules.

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