A discharged debt, a foreclosure warning, and a Social Security number on the envelope
A lawsuit filed in Puerto Rico accuses a debt buyer and its collection lawyers of trying to foreclose on a debt the homeowners say a bankruptcy court had already discharged.
The suit, filed August 13, 2026, in the US District Court for the District of Puerto Rico, was brought by a married couple who own a home in Ceiba. They are suing Legacy Mortgage, LLC and the firm it hired, Rivera-Munich & Hernández Law Offices, P.S.C., over what they describe as an unlawful attempt to collect a debt that was wiped out in bankruptcy. The claims run under the federal Fair Debt Collection Practices Act and the discharge injunction - the bankruptcy protection that stops creditors from chasing a debt once a court has discharged it.
The timeline, as the filing lays it out, is the heart of the case. The couple filed for Chapter 13 bankruptcy in August 2019. They challenged a claim tied to the debt, arguing it was not backed by any valid mortgage lien on their home. The bankruptcy court sustained that objection, the suit says, so the claim was not allowed as a secured claim. The homeowners completed their repayment plan, and in October 2022 the court entered a discharge order, which the filing says released their personal liability on the debt.
More than three years later, the collection activity resumed, according to the lawsuit. On or about February 20, 2026, the couple received a letter from the law firm saying it had been retained by Legacy to tell them the loan had been accelerated and that judicial foreclosure could follow. The letter described the debt as a mortgage "secured by a mortgage over the real property," reported an outstanding balance, and said the couple had defaulted, the filing states.
The plaintiffs say none of that was accurate. No valid mortgage secured the debt, they allege, and their liability had already been discharged. On those grounds, they claim the letter misrepresented "the character, amount, or legal status of any debt" and threatened action that could not legally be taken.
Then there is the envelope. The suit says the outside of the mailing carried the wording "LEGACY - EJECUCIONES RESIDENCIALES - N/E: L-0022 - C/A" - a reference to residential foreclosures - alongside one homeowner's full Social Security number, in view of postal workers and anyone else who handled the mail. The couple describe Legacy as a pure collection operation, saying in the filing that it "does not originate loans, does not service loans, and has no other principal purpose but for acquiring defaulted loans for collection." Both Legacy and the firm, they say, are "debt collectors" under the FDCPA.
The envelope claim broadens into a proposed class action against the law firm. The plaintiffs want to represent every person in Puerto Rico who received one of the firm's collection envelopes in the prior year carrying foreclosure-suggesting language or personal identifiers such as a Social Security number. The firm relies on "standardized mailing practices and templates," the filing says, and the proposed class could reach into the hundreds or thousands.
For the industry, the sharpest question is about diligence. The plaintiffs argue that anyone acquiring or enforcing this debt would have found their bankruptcy and discharge through a "routine review of publicly available bankruptcy records," and that seasoned buyers in the secondary market "knew or, at a minimum, should have known" the debt had been discharged and was not secured. That is the standard the case will test: what a collector is charged with knowing before the first letter goes out.
The homeowners are seeking actual, statutory, and punitive damages, along with attorneys' fees, costs, and sanctions.
For now, these are allegations only. No court has ruled on any of the claims.
