In Kinnick v. Med-1 Solutions, LLC, the District Court for the Southern District of Indiana found that sending a collection letter to a bankruptcy debtor provided that debtor with standing to file a claim based on the Fair Debt Collection Practices Act against the creditor outside of the bankruptcy case. For a creditor, Kinnick serves as a reminder that being aware of a debtor’s bankruptcy status is important, as a violation of the automatic stay can trigger claims against the creditor in the bankruptcy, as well as separate claims under the FDCPA.
Consumer Jason Kinnick received a collection letter from one of his creditors, Med-1, after he had filed a Chapter 7 bankruptcy and after Med-1 had received notice of the filing. Subsequently, Kinnick filed suit in U.S. District Court, alleging an FDCPA violation based on the collection letter’s violation of the automatic stay under 11 U.S.C. § 362.
Med-1 filed a motion to dismiss Kinnick’s FDCPA claim, arguing a lack of subject matter jurisdiction. Med-1 asserted that Kinnick failed to allege that he suffered, or that he faced a real risk of suffering, a concrete harm from the debt collector’s actions. Med-1 argued that the letter sent to Kinnick amounted to a “a bare procedural violation of the [FDCPA], which fails to satisfy the injury-in-fact requirement of Article III.” Kinnick v. Med-1 Sols., Ltd. Liab. Co., No. 1:19-cv-02563-TAB-SEB, 2019 U.S. Dist. LEXIS 178106, at *1-2 (S.D. Ind. Oct. 15, 2019). After all, Kinnick was already in a bankruptcy with respect to this particular debt.
The Court found that Med-1’s conduct was more than just a bare procedural violation. Med-1’s collection letter was “an allegedly deceptive letter that which [sic] was misleading as a matter of law.” The Court found that the letter was “the type of false, deceptive claim that Congress sought to prevent with the FDCPA and that he was harmed.” According to the Court, the letter misled Kinnick to think that filing bankruptcy was pointless and that he did not deserve the “fresh start” that comes with a bankruptcy filing. As a result, the Court found that Kinnick sufficiently “alleged that he suffered an injury-in-fact and concrete harm as necessary to establish standing.”
As Kinnick demonstrates, creditors can create potential exposure in certain instances if they send collection letters to consumers who are in active bankruptcy. Troutman Sanders has significant expertise in advising clients in how to avoid FDCPA claims and how to defend an FDCPA claim once one has been filed.