DEBT COLLECTORS
debt collectors filing stale claims in
a bankruptcy case also violate the
FDCPA.6
After Crawford, many courts have
chimed in on whether debt collectors
violate the FDCPA by filing a stale
claim in a bankruptcy. Courts have
reached different conclusions,
and the issue is now on appeal in
multiple circuits.7 It has been written
about numerous times, including
a recent ABI Journal article by our
colleagues, Alane A. Becket and
William A. McNeal.8
The cases disagreeing with
Crawford commonly find either that
(1) an FDCPA violation is precluded
by the Bankruptcy Code’s claims
process, or (2) filing a stale claim
is not deceptive, misleading or
unfair to the least sophisticated
6 Crawford, 758 F.3d at 1261;
see also In re Edwards, -- B.R. --,
2015 WL 5830823, at *4-5 (Bankr.
N.D. Ill. Oct. 6, 2015) (finding strong
similarities between collection lawsuits
outside of bankruptcy and proofs of
claim in a bankruptcy case).
7 See, e.g., Owens v. LVNV
Funding, LLC, 2015 WL 1826005 (S.D.
Ind. Apr. 21, 2015), appeal docketed,
No. 15–2044 (7th Cir. May 13, 2015);
Torres v. Asset Acceptance, LLC, –––
F.Supp.3d ––––, 2015 WL 1529297
(E.D. Pa. 2015), appeal docketed, No.
15–2132 (3d Cir. May 13, 2015).
8
Alane A. Becket and William
A. McNeal, A Claimant’s Dilemma:
The Statute of Limitations and Proofs of
Claim, ABI Journal, Vol. XXXIV, No.
4, pp. 50-51 and 104 (April 2015). See
also Kailey Grant, Katherine Yonover
and Scott Zimmerman, Cracking
the Crawford Code, ABI Journal,
Vol. XXXIV, No. 9, pp. 34-35 and 84
(September 2015).
debtor and therefore does not
violate the FDCPA. Contrary to the
holding of some courts preclusion
of FDCPA claims is not supported
by the text of the Bankruptcy
Code or an irreconcilable conflict
between the two statutes. Instead
the viability of FDCPA claims
protects debtors and maintains the
integrity of the bankruptcy claims
process. Other bankruptcy courts
hold that the least sophisticated
consumer standard does not
apply in the bankruptcy context
because debtors are protected by
the safeguards embedded within
the Bankruptcy Code and Rules.9
These “safeguards,” however,
do not exist in the daily trenches
of bankruptcy practice, and they
should not be used to shield debt
collectors from liability.
THE FDCPA IS CRUCIAL IN
MAINTAINING THE INTEGRITY
OF THE BANKRUPTCY CLAIMS
PROCESS
“‘[W]hen two statutes are capable
of coexistence, it is the duty
of the courts, absent a clearly
expressed congressional intention
to the contrary, to regard each
as effective.’”10 The standard for
establishing preclusion requires
clear text or irreconcilable conflict
between two statutes. There is no
direct textual conflict between the
Bankruptcy Code and the FDCPA
9
See In re LaGrone, 525 B.R.
419, 427 (Bankr. N.D. Ill. 2015);
Birtchman v. LVNV Funding, LLC,
No. 1:14-CV-00713-JMS, 2015 WL
1825970, at *7-8 (S.D. Ind. Apr. 22,
2015); In re Perkins, 533 B.R. 242, 261
(Bankr. W.D. Mich. 2015).
10 J.E.M. Ag Supply, Inc. v.
Pioneer Hi-Bred Int’l, Inc., 534 U.S. 124,
143-44 (2001); Morton v. Mancari, 417
U.S. 535, 550 (1974).
National Association of Consumer Bankruptcy Attorneys
Winter 2015
on this issue. Further, there is
no implied preclusion because
there is no irreconcilable conflict
between the two statutes.11 While
the Bankruptcy Code contains
a process for filing proofs of
claim, nothing in that process
compels a debt collector to file a
claim for a legally unenforceable
debt.12 That is, the Bankruptcy
Code’s
permissive
language
does not authorize conduct that
it is otherwise prohibited by the
FDCPA.
Furthermore, the fact
that debt collectors are singled
out for additional regulation does
not create a conflict; it reflects
Congress’s considered judgment
that this particular group imposes
heightened risks of public harm,
and its behavior must be restricted
in ways that do not affect ordinary
creditors.
The bankruptcy claims process is
designed to run fairly and efficiently.
It sets presumptions in favor of
validity in order to expedite claims
resolution. It is antithetical to the
efficient operation of the system
to allow debt collectors to engage
11 See In re Feggins, -- B.R. --,
2015 WL 5011224 (Bankr. M.D. Ala.
Aug. 25, 2015).
12
It is a violation of the FDCPA
for debt collectors to represent that
a debt is legally enforceable in a
bankruptcy. A claim on a time barred
debt is automatically “allowed” upon
filing under 11 U.S.C. § 502(a) and
per se legally enforceable against a
debtor’s estate. The filing of a time
barred proof of claim is therefore legal
enforcement of a legally unenforceable
claim. It is certainly not an invitation
to repay the tim e barred debt as a
moral obligation. See McMahon, 744
F.3d at 1020.
CONSUMER BANKRUPTCY JOURNAL
13