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Supreme Court listens to oral arguments in debt collector case

Kentucky residents with overdue bills are likely familiar with the aggressive tactics of debt collection companies. These businesses are part of a thriving industry that already generates about $13.7 billion annually, but critics say that debt collectors frequently violate both federal bankruptcy laws and consumer protection legislation. Circuit courts have not ruled consistently on these matters, and the resulting legal ambiguity has attracted the attention of the U.S. Supreme Court.

Debt collectors cast a wide net when they try to collect debts that have been purchased for as little as 2 cents on the dollar, and these efforts often include submitting proofs of claim in Chapter 13 bankruptcy cases. Each state has a time limit in place for old debts, but many collection companies ignore these rules and submit claims for what are referred to as 'time-barred debts." This places undue stress on debtors, their attorneys and the country's bankruptcy courts, and many lawsuits have been filed over the practice.

The nation's highest court heard arguments from attorneys representing a California-based debt collection company and a debtor from Alabama. A Supreme Court ruling would settle the matter and let both debtors and debt collectors know where they stand, and there may be reason for consumers to feel cautiously optimistic about the outcome. The federal government appeared to place its weight behind borrowers when the U.S. Solicitor General filed a brief in support of the debtor involved.

Dealing with harassment from creditors on a daily basis can make a difficult financial situation unbearable, but filing a personal bankruptcy puts an end to this kind of abuse and offers the possibility of a new start. Attorneys with debt relief experience could also explain how those who pursue a Chapter 13 bankruptcy may be able to hold onto important assets like their cars or houses.

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