This class action alleges that LVNV Funding and Resurgent Capital Services violated RICO and debt collection laws by attempting to claim payment in Chapter 13 bankruptcy cases for debts they did not own or for “stale” debts.
The proposed class for this action includes all persons who filed a Chapter 13 bankruptcy case in the US where one or both of these companies filed a proof of claim for a debt that they were not the valid owners of or that was time-barred at the time the case was filed, and that they received payment on. The class period is the 48 months prior to the filing of the complaint. There is also a proposed California subclass with a class period of only 12 months prior to the filing of the complaint.
A Chapter 13 bankruptcy case is essentially a repayment plan, allowing an individual who files for bankruptcy to pay back their creditors according to a court-confirmed plan. The debtor makes a monthly payment to the chapter 13 bankruptcy trustee, who disburses the money to pay creditors.
In a chapter 13 bankruptcy case, creditors received a notice containing a bar date by which they must file proofs of claims that serve as the basis for the amounts owed to each. State law controls whether the claims filed are enforceable. If the creditor has no valid right to collect the debt, or if the statute of limitations makes the debt unenforceable (“stale” or “time-barred”), then the proof of claim will be disallowed and the creditor will not be entitled to collect the debt.
Debtors may object to a proof of claim, but in order to do so, they must pay the costs of preparing and filing the objection. Thus they may not be willing or able to pay for many proofs of claim, especially for smaller amounts. Creditors may take advantage of this by filing many proofs of claim that they know are not valid.
The complaint says that LVNV and Resurgent did exactly this. According to the complaint, LVNV purchases consumer debt while Resurgent manages and collects debts for LVNV. The complaint alleges that LVNV and Resurgent share many of the same executive management personnel and that these companies have colluded to segregate their operations to shield the shared executive management from liability, confuse investigative agencies, and perpetuate their false enterprises.
The complaint therefore charges that LVNV and Resurgent have violated RICO laws in forming a criminal conspiracy and acting in concert with one another to file hundreds of thousands of proofs of claim in Chapter 13 bankruptcy cases, even though they are not the owners of the debts or the debts are time-barred. The complain also charges that they have violated consumer debt collection laws.
As of September, 2015, the defendants have not answered the complaint. We will update the status in early 2016.