FEDERAL COURT DISTINGUISHES WALLS | Key Points

1. The United States Court of Appeals for the Ninth Circuit reversed a creditor’s summary judgment finding the debtor’s (“Manikan”) FDCPA claims against debt collector Peters & Freedman, L.L.P. (“P&F”) were not barred even though the debt was discharged in bankruptcy prior to Manikan’s lawsuit against P&F. Manikan v. Peters & Freedman, L.L.P., 19-55393, 2020 WL 6938318 (9th Cir. Nov. 25, 2020). In reversing the district court’s judgment in favor of the creditor, the Ninth Circuit distinguished its prior holding in Walls v. Wells Fargo Bank, 276 F.3d 502 (9th Cir. 2002).

2. The Ninth Circuit concluded Walls was distinguishable because in Manikan the debtor was not seeking a remedy for P&F’s violation of the bankruptcy discharge order, but rather because P&F “tried to collect a debt that [Manikan] fully paid nearly two years before his debts were discharged in bankruptcy.” The Court explained even if Manikan’s debt was never discharged under his Chapter 13 bankruptcy plan, he still could have asserted “P&F acted unlawfully” when it attempted “to collect a debt [Manikan] fully satisfied.” The Court concluded “Manikan’s FDCPA claims [were] therefore premised on a wholly independent theory of relief” unrelated to the discharge order and therefore not barred under § 524 and prior precedent (Walls). The Court remanded the matter for further proceedings.

3. This case demonstrates the importance of proper record keeping throughout the debt collection process and the need for established protocols for verifying a debt prior to involving the debtor. Hiring a law firm with these platforms and protocols in place can avoid costly mistakes like those made in Manikan.

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