The West Virginia Consumer Credit and Protection Act (“WVCCPA”) is a remedial statute designed to protect West Virginia consumers from improper debt collection. Only “consumers” have standing to file a lawsuit under the WVCCPA. The term “consumer” is defined as a natural person that owes a debt or allegedly owes a debt. But does a person still owe debt if that debt was discharged by a bankruptcy court? Although there is some conflicting case law in West Virginia, an answer is forming.
Bankruptcy courts have ruled that a discharge in bankruptcy does not cancel or extinguish debt; only the debtor’s personal liability for payment is discharged. The debtor is not compelled to make payments, and the debt collector cannot file a lawsuit to collect the debt. However, the debt still exists, and if not paid, the debt collector can repossess collateral such as through a foreclosure sale or repossession of an automobile. If the debtor could lose their property if they do not make the payments, does that mean they still “owe a debt?” Can they still sue under the WVCCPA for improper attempts to collect that debt?
West Virginia state and federal courts have mostly come down on one side of this issue, ruling that if a debt was discharged in bankruptcy, then the debtor is no longer obligated to pay the debt and, and such, the debtor is not a consumer with standing to sue under the WVCCPA. Claims under the WVCCPA regarding discharged debts have been dismissed in both West Virginia state and federal courts.
However, there is an outlier. Specifically, Judge Gray Silver III of the Circuit Court of Berkeley County ruled in Cookus v. Westlake Serv., LLC, that the natural obligation to repay the debt still exists after bankruptcy as evidenced by the fact that Congress saw fit to remind debtors that they may still voluntarily repay their debts. He also argued that because these debts can be revived if the bankruptcy action is reopened, “it is absolutely incorrect to state that an obligation ceases to exist as of the date of the discharge, otherwise the obligations could not be reasserted in any way.” The discharged debtor in that case had standing to sue under the WVCCPA.
The majority approach appears more equitable for both parties to the debt. It is only fair that if a debt collector cannot sue to collect a debt, then the debtor should not be able to sue the debt collector for improper collection of that same debt. The debtor chose to discharge the debt and could have chosen instead to reaffirm the debt in the very same bankruptcy action.
This issue has not reached the West Virginia Supreme Court of Appeals, and until then there is no definitive answer as to how a bankruptcy discharge affects claims under the WVCCPA. However, Judge Silver has recently retired from the bench and the majority of case law (including subsequent case law in the Circuit Court of Berkeley County) favors dismissal of WVCCPA claims with respect to discharged debts.
Troutman Sanders will continue to monitor this issue.