Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Daniel Gill
Oct. 11 — The Supreme Court granted review Oct. 11 of an Eleventh Circuit decision to determine whether a credit collection agency can pursue claims in bankruptcy that would be time-barred in another court ( Johnson v. Midland Funding, LLC, U.S., No. 16-348, review granted 10/11/16 ).
Parties in this case and a similar case from the Seventh Circuit urged that Supreme Court guidance was necessary to resolve a split in the circuit courts.
In the decision below, the U.S. Court of Appeals for the Eleventh Circuit found that a debt collector can be found to be in violation of the Fair Debt Collection Practices Act’s prohibition against misleading or deceptive practices if it files a proof of claim in a bankruptcy case on a debt that the collector knows is otherwise barred by the expiration of the applicable statute of limitations ( Johnson v. Midland Funding, LLC , 11th Cir., No. 15-11240, 2016 ).
The court did not grant review of another circuit decision raising the same question. In Owens v. LVNV Funding, LLC , 7th Cir., No. 15-2082, 8/10/16 , the Seventh Circuit, over a strong dissent by Chief Judge Diane P. Wood, said that a credit collection company wasn’t in violation of the FDCPA when it filed a claim in the bankruptcy case of a debtor even if the collection agency knew that it couldn’t sue to collect on the claim, because the applicable statute of limitations had expired.
The questions now before the high court, as noted in the petition for review, are twofold: (1) whether the Bankruptcy Code precludes applying the FDCPA to the act of filing a proof of claim for a time-barred debt; and (2) whether that act is actionable under the FDCPA.
In the decision below, the Eleventh Circuit made two rulings for which the debt collection company sought high court review. First, it answered a threshold question and said that the FDCPA and the Bankruptcy Code can coexist; neither of the federal statutes must preempt the other ( 28 BBLR 707, 6/2/16).
Then the court addressed whether the debt collector can file a bankruptcy proof of claim for a time-barred debt.
The Eleventh Circuit decided that creditors can file proofs of claim that they know to be barred by the statute of limitations, but those creditors aren’t free from all consequences of filing those claims. If a debt collector chooses to file a time-barred claim, he is “simply opening himself up to a potential lawsuit for an FDCPA violation,” the court said.
Balch & Bingham LLP, Birmingham, Ala., and Williams & Connolly LLP, Washington, filed the petition for review.
To contact the reporter on this story: Daniel Gill in Washington at email@example.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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