Illinois District Court Refuses to Adopt Categorical Rule that a Bankruptcy Disclaimer on a Post-Discharge Communication to a Debtor Excuses Debt Collector from Liability

Illinois District Court Refuses to Adopt Categorical Rule that a Bankruptcy Disclaimer on a Post-Discharge Communication to a Debtor Excuses Debt Collector from Liability

On March 25, 2019, the United States District Court for the Northern District of Illinois denied a motion to dismiss an FDCPA class action lawsuit for collection on a discharged debt.

The Debtor filed a chapter 13 bankruptcy petition and surrendered his house to the creditor in full satisfaction of claims. The plan was confirmed, completed, and the Debtor received a discharge. Subsequently The Law Offices of Ira T. Nevel, LLC (Nevel firm) filed a foreclosure complaint and sent a letter to the Debtor stating in pertinent part:

Your mortgage loan has been referred to our office to file a foreclosure complaint….As of 06/18 12018, you owe U.S. BANK NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE FOR THE RMACTRUST, SERIES 20I6-CTT $309,456.68…The law does not require this office to wait until the end of the thirty-day period before suing you to collect this debt…If you do not dispute this debt within this thirty-day period, we will assume that the debt is valid…THIS LAW FIRM IS A DEBT COLLECTOR AND WE ARE ATTMEPTING TO COLLECT A DEBT OWED TO OUR CLIENT. ANY INFORMATION OBTAINED FROM YOU WILL BE USED FOR THE PURPOSE OF COLLECTING THE DEBT.

The Debtor, by his attorneys The Sulaiman Law Group Ltd, then filed a class action lawsuit against the Nevel firm alleging violations of the Fair Debt Collection Practices Act (FDCPA) 15 U.S.C. §1692 et seq. Debtor alleges that language in the letter, “you owe [creditor] $309,456.58” is false and in violation of 15 U.S.C. $$ 1692e(2) and 1692e(10). Section 1692e(2) prohibits “[t]he false representation of the character, amount, or legal status of any debt; or any services rendered or compensation which may be lawfully received by an debt collector for the collection of a debt.” l5 U.S.C. $ 1692e(2). And, Section 1692e(10) prohibits, “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 15 U.S.C. $ 1692e(10). Plaintiff further alleges that the statement is false because his debts were discharged through his bankruptcy proceedings in September 2017.

The Nevel firm filed a motion to dismiss and argued in part that the bankruptcy disclaimer exculpates it from liability and makes the letter informational rather than an attempt to collect a debt. The disclaimer language states

IF YOU ARE CURRENTLY IN A BANKRUPTCY PROCEEDING OR HAVE PREVIOUSLY OBTAINED A DISCHARGE OF THE DEBT UNDER APPLICABLE BANKRUPTCY LAW, THIS NOTICE IS FOR INFORMATION ONLY AND IS NOT AN ATTEMPT TO COLLECT THE DEBT, A DEMAND FOR PAYMENT, OR AN ATTEMPT TO IMPOSE PERSONAL LIABILITY FOR THAT DEBT. YOU ARE NOT OBLIGATED TO DISCUSS YOUR HOME LOAN WITH THIS OFFICE OR YOUR MORTGAGE LENDER. YOU SHOULD CONSULT WITH YOUR BANKRUPTCY ATTORNEY OR OTHER ADVISOR ABOUT YOUR LEGAL RIGHTS AND OPTIONS.

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