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Supreme Court to Rule on Bankruptcy Debt Collection
7 Nov
Summary
- High court will hear Goldman Sachs' appeal on debt collection during bankruptcy.
- Debtors claim bank violated automatic stays by pursuing debt.
- Lower court ruled arbitration conflicts with bankruptcy code.
The US Supreme Court will examine whether debtors must submit to arbitration when creditors violate automatic stays during bankruptcy. This case stems from a proposed class action against Goldman Sachs Bank USA, which is accused of continuing to collect credit card debt after individuals sought bankruptcy protection.
A divided 4th US Circuit Court of Appeals previously ruled against Goldman Sachs, finding that compelling arbitration would undermine the core purposes of the bankruptcy code, including centralization and the necessity of automatic stays.
Goldman Sachs is appealing this decision, arguing that lower courts are confused about how the Federal Arbitration Act interacts with bankruptcy law. The debtors contend their claims are integral to bankruptcy proceedings and that bankruptcy judges can enforce stays with sanctions.
The Supreme Court's decision is anticipated before the end of its current term in mid-2027, potentially clarifying significant legal questions.
