(Adds background on dispute, paragraphs 3-6)
By Lawrence Hurley
WASHINGTON Oct 11 The U.S. Supreme Court on
Tuesday agreed to decide whether people who have filed for
bankruptcy can sue companies that attempted to collect old debt
from them that was not required to be paid back because of state
statutes of limitations.
The justices will hear an appeal filed by Midland Funding, a
subsidiary of Encore Capital Group, which was sued by an
Alabama debtor named Aleida Johnson, who entered bankruptcy in
2014. Midland sought payment of $1,879 in debt that Johnson had
incurred more than a decade earlier. Alabama law sets a six-year
statute of limitations for debt to be collected.
Lawyers for debtors have said it is common practice for debt
collection companies, which buy consumer debt at pennies on the
dollar, to attempt to recoup debt that is not legally
recoverable under state law unless the creditor actually agrees
to pay it.
If the debtor does not object, claims can be made against
them when they have entered bankruptcy even if there is no legal
basis for the debt to be collected.
Lawyers for the debt collection companies said bankruptcy
law allows them to file such claims even when there is no legal
mechanism for them to collect.
The court will hear arguments and rule on the case by the
end of June.
(Reporting by Lawrence Hurley; Editing by Will Dunham)