Debt Buyers Beware: Filing Proofs of Claim for Time-Barred Debt in the Eleventh Circuit and Beyond

In Crawford v. LVNV Funding, LLC, the United States Court of Appeals for the Eleventh Circuit remarked on a “deluge” sweeping through the U.S. bankruptcy courts: “Consumer debt buyers—armed with hundreds of delinquent accounts purchased from creditors—are filing proofs of claim on debts deemed unenforceable under state statutes of limitations.” More recently, federal courts have faced a deluge of a different sort: lawsuits and adversary proceedings alleging that debt collectors violate the Fair Debt Collection Practices Act (FDCPA) by filing such time-barred proofs of claim. The flood of FDCPA cases can be attributed, at least in part, to Crawford, a 2014 case that held that filing time-barred claims is “unfair,” “unconscionable,” “deceptive,” and “misleading” under sections 1692e and 1629f of the FDCPA. Over the last two years, “copycat” Crawford cases have been winding their way through bankruptcy and district courts across the nation. In the absence of clear guidance from the Bankruptcy Code and Rules, a variety of approaches to address FDCPA liability for stale proofs of claim has emerged. At the time of this writing, appeals on some dimension of this topic are pending in the Courts of Appeals for the Third, Fourth, Sixth, Seventh, and Eighth Circuits. Just last month, the Eleventh Circuit resolved an issue that the Crawford opinion “dodged”: the extent to which bankruptcy’s claims allowance process precludes application of the FDCPA. In Johnson v. Midland Funding, LLC, the court held that a debt collector’s conduct in bankruptcy could form the basis of an FDCPA claim. This holding lends greater weight to Crawford and deepens a circuit split on the intersection of the FDCPA and the Bankruptcy Code. This issue of the Bankruptcy Law Letter examines the Eleventh Circuit’s recent case law stale proofs of claim, with an eye toward the appeals pending in other circuits. It focuses on two key questions: First, to what extent does the Bankruptcy Code’s comprehensive statutory scheme impliedly repeal the FDCPA? Second, does filing an accurate but stale proof of claim offend the FDCPA?