Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
Sept. 30 — Prosecuting violations of the Fair Debt Collection Practices Act in bankruptcy provides financial incentives for debtors’ attorneys to review and object to stale Chapter 13 claims, according to a Sept. 29 panel discussion at the National Conference of Bankruptcy Judges, Miami, Fla. The panelists focused on how life can be unfair to debt buyers, and pondered whether it is an unfair debt-collection practice not to disclose a time-barred debt as unenforceable.
Debt-buyers, companies that are in the business of buying consumer debts and trying to collect on them, have a financial incentive to file stale claims in Chapter 13 bankruptcies. “Absent an objection from either the Chapter 13 debtor or the trustee, the time-barred claim is automatically allowed against the debtor pursuant to 11 U.S.C. § 502(a)-(b) and Bankruptcy Rule 3001(f),” according to the decision in Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1259 (11th Cir. 2014), cert. denied, 135 S. Ct. 1844, 191 L. Ed. 2d 724 (2015)(26 BBLR 1001, 7/24/14). “As a result, the debtor must then pay the debt from his future wages as part of the Chapter 13 repayment plan, notwithstanding that the debt is time-barred and unenforceable in court.”
The Fair Debt Collection Practices Act imposes civil liability on debt collectors for “false, deceptive, or unfair” debt-collection practices. Consumer debtors have a private right of action to enforce the Act’s provisions, and can receive actual and statutory damages as well as reasonable attorney’s fees and costs against violating debt collectors. Crawfordheld that the filing of a proof of claim on a stale debt in a bankruptcy proceeding is a violation of the FDCPA.
Alane A. Becket of Becket & Lee, Malvern, Pa., and Prof. Dalie Jimenez of the University of the Connecticut School of Law, Hartford, Conn., noted that most of the consumer debt purchased is credit card debt. And until recently, with the advent of enforcement activity by the Consumer Financial Protection Bureau, the information debt buyers received from creditor banks selling the debt was minimal. What’s more, most contracts governing the relationship between debt buyers and creditor banks stated that the banks did not warrant the information provided was accurate.
Debt buyers being held liable for filing stale claims in bankruptcy when they were not provided sufficient information by the selling banks seems unfair, the panelists noted. Also, the FDCPA does not apply to all creditors (i.e., those selling banks), only the professional debt-collectors.
In Becket’s view nothing in the FDCPA prohibits the lawful collection of debts for which the statute of limitations for filing suit has run; except that Crawford makes the filing of a proof of claim on a stale debt unlawful, at least in the Eleventh Circuit. Jimenez noted that it might be unfair to have the limited resources of a Chapter 13 estate go in part to stale claims. That reduces the payments to other legitimate creditors with enforceable claims.
Nick Wooten of Nick Wooten, LLC, Auburn, Ala., noted that the issue now before the courts is whether the Bankruptcy Code repeals the FDCPA by implication. The Second and the Ninth Circuits have ruled that it does, in Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2nd Cir. 2010); (27 BBLR 555, 4/16/15), and Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir. 2002). The Third and the Seventh Circuits have ruled to the contrary, in Simon v. FIA Card Services, N.A., 732 F.3d 259, 271 (3d Cir. 2013) (24 BBLR 970, 7/26/12), and Randolph v. IMBS, Inc., 368 F.3d 726, 732 (7th Cir. 2004).
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)