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Bankruptcy Discharge Cannot Form the Sole Basis of an FDCPA Claim

There is no violation of the FDCPA which can be based solely upon alleged efforts to collect a debt previously discharged in bankruptcy, according to a recent decision from the District of New Jersey litigated by attorneys of Maurice & Needleman on behalf of AFNI, Inc.

While a case of first impression within the District of New Jersey, the decision, Perkins v. AT&T Mobility, drew from a well-established body of case law within the Third Circuit holding that no private right of action exists for violation of a bankruptcy discharge injunction. Instead, any claim arising from a discharge injunction must be maintained as a contempt proceeding in the bankruptcy court where the discharge was first granted.

In its briefing, AFNI argued:

To the extent that the Plaintiff bases his entire FDCPA claim solely on the act of attempting to collect a debt allegedly “discharged in bankruptcy” it imbricates the scope of the 11 U.S.C. 524(a)(2) discharge injunction, amounts to a “back door” attempt to assert a private right of action under § 524 and is precluded. . .

Judge Joseph Irenas, in dismissing the putative class action complaint, agreed and wrote:

While discharge in bankruptcy does serve as an injunction against a creditor’s attempts to collect debts as obligations of the debtor, there is no private right of action for violation of that discharge. * * * The FDCPA does not serve as a “back door” which would allow such a private right of action. (citations omitted).

A copy of the decision is available at this link: order and decision dismissing claims with prejudice

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Donald Maurice provides counsel to the financial services industry, successfully litigating matters in the state and federal courts in individual and class actions. He has successfully argued before the Third, Fourth and Eighth Circuit U.S. Courts of Appeals, and has represented the financial services industry before several courts including as counsel for amicus curiae before the United States Supreme Court. He counsels clients in regulatory actions before the CFPB, and other federal and state regulators and in the development and testing of debt collection compliance systems. Don is peer-rated AV by Martindale-Hubbell, the worldwide guide to lawyers. In addition to being a frequent speaker and author on consumer financial services law, he serves as outside counsel to RMA International, on the governing Board of Regents of the American College of Consumer Financial Services Lawyers and on the Governing Committee of the Conference on Consumer Finance Law. From 2014 to 2017, he chaired the ABA's Bankruptcy and Debt Collection Subcommittee.