Former IRS and Special Assistant US attorney (Bankruptcy)
Over 30 years of experience in tax defense/litigation and bankruptcy
Providing legal service with a personal touch

Just a mention of the Internal Revenue Service seems to instill fear in the hearts of many. Debt collectors are thought of as an annoyance that savvy debtors have learned to avoid by the use of caller ID. Now just imagine if the IRS and debt collection agencies joined forces.

 This scenario is now a reality. On September 26 the IRS announced that starting in Spring 2017 it will roll out a new program to collect overdue taxes on accounts which are currently inactive. Pursuant to authority granted by Congress last December the program allows designated private collection agencies to collect delinquent taxes on behalf of the IRS. Four agencies have been chosen for this task.

 The collection agencies must respect taxpayer rights, be courteous and abide by the Fair Debt Collection Practices Act. Because we know collection agencies would never violate the FDCPA, right?! The potential for scammers to defraud taxpayers by impersonating collection agencies claiming to be working on behalf of the IRS should be readily apparent. With thIs in mind the IRS has taken steps to address this issue.

 First, the IRS will send written notification to the taxpayer that his/her account is being transferred to a private collection agency. If the taxpayer has appointed a representative, the notification will also be sent to the representative. Second, the collection agency will send the taxpayer and his/her representative a second letter confirming the transfer of the delinquent tax account.

 It is important to know that the private collection agencies will not ask that payment be made on a prepaid debit card. In fact, the collection agencies will not receive any payments on behalf of the IRS. All payments will be made by check payable to the US Treasury and sent directly to the IRS or made electronically on the site. This is another protection mechanism against potential scammers.

 Please call my office if you want additional information regarding the program or the identity of the four collection agencies which will be involved in this program.

A creditor who is owed a debt may collect it from the debtor through all legal means. State statutes of limitation impose a time period during which the creditor may pursue collection in court. After this period expires, the creditor’s claim, while still outstanding, is deemed time-barred under the law and the creditor cannot avail itself of the legal system to collect it. In Florida, the statute of limitations for bringing a lawsuit on a debt is four or five years, depending on the basis for the debt. Fla. Stat. §95.11  

Many times, especially in the case of consumers, the creditor will sell the outstanding debt to a collection agency. Due to the abusive and deceptive collection practices of these agencies, Congress enacted the Fair Debt Collection Practices Act in 1977. The Act applies only to consumer debts and only to debt collectors, defined as someone who regularly collects debt or is in a business whose principal activity is the collection of debts. A creditor who is collecting a debt on its own behalf is not a debt collector under the Act.  

A debt collector can be liable if its actions violate the provisions of the FDCPA. While a debt collector can attempt to collect on a time barred debt, it walks a fine line in attempting to collect on such a debt and must be ever mindful of the FDCPA provisions.

It is not uncommon for a consumer dealing with phone calls from debt collectors to avail him/herself of the Bankruptcy Court. Can the debt collector file a proof of claim in the  bankruptcy case for the time-barred debt? Is filing the proof of claim a violation of the FDCPA? Can the debtor bring an action against the debt collector for violations of the FDCPA?  

I n Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1261 (11th Cir. 2014) the court held that a debt collector violates the FDCPA and may be held liable when it files a proof of claim in a bankruptcy case on a debt that it knows to be time-barred, even if the claim is valid. The court reiterated this position in Johnson v. Midland Funding, LLC, 823 F.3d 1334 (11th Cir. 2016). The Eleventh Circuit’s decision conflicts with decisions of the Fourth, Seventh and Eighth Circuits which hold that the filing of a time-barred, but otherwise valid and accurate proof of claim, does not violate the FDCPA.  

Further the Eleventh Circuit found that the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, does not prohibit the filing of a valid, though time-barred, proof of claim. However, debt collectors who file claims which they know to be time-barred can be held liable under the FDCPA. The Court found no conflict between the Bankruptcy Code and the FDCPA and held that the Code did not preclude the application of the FDCPA. This holding is in conflict with a decision from the Ninth Circuit.  

Faced with conflicting Circuit opinions on two substantial issues, the Supreme Court granted certiorari in the Johnson case on October 11. As of yet no date has been set for arguments in the case, but hopefully we will have some finality on the issues presented in the case namely: (1) Whether the filing in bankruptcy of an accurate proof of claim for a valid, but time barred debt violates the FDCPA and (2) Whether the Bankruptcy Code precludes the application of the FDCPA.  

Stay tuned!    
With more than 30 years of experience in handling individual and business tax matters before the IRS, I can assist in dealing with the IRS. As a former attorney for the IRS, I know how to navigate the system to try to find solutions to clients' tax problems. I can represent clients anywhere in the USA during audit, appeals, collection and in litigation before the United States Tax Court.

Bankruptcy may be a solution, not only for those facing difficult financial circumstances, but also for those with tax problems. If you qualify, bankruptcy may provide you with a “fresh start”. With more than 25 years of experience representing debtors, and as a former US Special Assistant US Attorney representing the IRS in Bankruptcy Court, I can evaluate your situation to determine whether bankruptcy is the best option.
Magda Abdo-Gomez, Esq.
Phone: 305-559-7478
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