Ch. 13 Bankrupt Has Standing to Sue for FDCPA Violations

This folder examines who is the proper party to bring a lawsuit. This folder examines the issues from the standpoint of consumer-damage suits and collection suits brought against the consumer.
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David A. Szwak
Posts: 1974
Joined: Thu Jul 13, 2006 11:19 pm

Ch. 13 Bankrupt Has Standing to Sue for FDCPA Violations

Post by David A. Szwak »

The U.S. Court of Appeals for the Tenth Circuit recently held that a debtor who files for bankruptcy under Chapter 13 has standing to sue for a Fair Debt Collections Practices Act (FDCPA) claim. Smith v. Rockett, No. 06-6331 (10th Cir. Apr. 11, 2008).

The district court had dismissed the FDCPA claim holding that only the bankruptcy trustee has standing to sue on behalf of the estate, as in Chapter 7 proceedings.

However, the Tenth Circuit, agreeing with the four circuit courts that have considered this issue, reversed the district court’s ruling. In holding that a Chapter 13 debtor has standing to bring claims in his or her own name on behalf of the bankruptcy estate, the court found that in a Chapter 13 case, unlike a Chapter 7 case, the debtor remains in possession of the estate, the duties of a Chapter 13 trustee differ from those of a Chapter 7 trustee, and a Chapter 13 debtor has many of the same rights and powers as a Chapter 7 trustee.

The court further indicated that the Chapter 13 debtor’s standing to sue is supported by the legislative history of Chapter 13. However, the court did note that the underlying bankruptcy claim was dismissed with prejudice soon after her complaint was filed in this case.

While the defendants claimed that the dismissal of the bankruptcy case precluded any further bankruptcy proceedings, the court stated that this issue should be considered by the bankruptcy court on remand.

In remanding the case to the bankruptcy court, the Tenth Circuit stated that “the bankruptcy court should determine whether it would be permissible and appropriate to reopen Plaintiff’s bankruptcy case.â€
David Szwak
Chairman, Consumer Protection Section, Louisiana State Bar Association
Bodenheimer, Jones & Szwak
509 Market Street, 7th Floor
Mid South Tower
Shreveport, Louisiana 71101
Fax 318-221-6555
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