DEBT COLLECTORS
less than 100% of all claims. In
most chapter 13 cases a Debtor
does not propose to pay back his
creditors in full. In those cases,
the claims that are filed are paid
pro-rata with other claims. This
means that the parties who suffer
from the allowance of time-barred
claims are other creditors who have
their pro-rata claims diluted and
are therefore paid less.18 Even in
cases for which 100% of claims are
going to be paid, it remains timeconsuming and expensive to object
to claims, particularly when the
proof of claim is deficient. Debtors
cannot afford the cost of litigating
small unsecured claims, and most
debtors’ attorneys do not have the
time or resources to litigate the
issue without compensation.
FALSE SAFEGUARD #3:
The
Chapter 13 Trustee or the United
States Trustee program will object
to the claim.
The Bankruptcy Code provides
that a trustee can object to a claim
“if a purpose will be served.”19
Most trustees will follow the same
rationale as debtors’ counsel
that those harmed are only other
unsecured creditors. In practice
trustees rarely, if ever, object to
debt collectors’ stale claims. Nor
do trustees expend resources
to ensure compliance with Rule
18 See 15 U.S.C. § 1692(e)
(stating that the FDCPA’s purpose
includes “eliminat[ing] abusive debt
collection practices by debt collectors”
and “insur[ing] that those debt
collectors who refrain from using
abusive debt collection practices are
not competitively disadvantaged”).
19 See 11 U.S.C. § 1302(b)(1)
(incorporating 11 U.S.C. § 704(a)(5)).
3001(c)(3). 20
The United States Trustee’s
Program is the only national
enforcer of the bankruptcy rules,21
but it only investigates a tiny
fraction of filed claims and initiates
even fewer enforcement actions.
In July 2014, Clifford J. White III,
Executive Director for the United
States Trustee Program, stated that
in the previous 10-month period, the
USTP reviewed more than 22,000
claims and found great variation
in compliance among filers. 22 In
almost that same period (between
June 30, 2013 and June 30, 2014)
there was a total of 321,278 chapter
13 bankruptcy cases filed.23 If one
20 See In re Edwards, -- B.R. --,
2015 WL 5830823, at *5 (Bankr. N.D.
Ill. Oct. 6, 2015).
21
Statement of Clifford J. White
III, Director of the Executive Office
for United States Trustees before
the Committee on the Judiciary
Subcommittee on Regulatory Reform,
Commercial and Antitrust Law,
U.S. House of Representatives at a
Hearing Entitled “Ongoing Oversight:
Monitoring the Activities of the U.S.
Trustee Program,” May 19, 2015, p.6,
available at http://www.justice.gov/
file/440401/download.
22
Remarks of Clifford J. White
III, Director of the Executive Office
for United States Trustees before the
49th Annual National Association of
Chapter Thirteen Trustees Seminar on
July 17, 2014, p.3, available at http://
www.justice.gov/sites/default/files/
ust/legacy/2014/07/17/NACTT_49th_
Annual_Sem_07172014.pdf.
23
See Table F-2 – Bankruptcy
Filings (June 30, 2014), available at
http://www.uscourts.gov/statistics/
table/f-2/statistical-tables-federaljudiciary/2014/06/30.
National Association of Consumer Bankruptcy Attorneys
Winter 2015
takes a conservative estimate of
only five unsecured claims filed
in each chapter 13 case, then
approximately 1,606,390 claims
were filed in chapter 13 cases in that
period. Therefore, conservatively
the USTP reviewed only about
1.4% of claims for compliance
with the rules, found levels of
compliance varied even among that
small sample, and did not take any
public enforcement action against
debt collectors.
None of these “safeguards” provide
debtors any actual protection in the
vast majority of bankruptcy cases.
CONCLUSION
The bankruptcy safeguards relied
upon to distinguish Crawford
and deny debtors the protections
of the FDCPA are unfounded.
Arguments that the Bankruptcy
Code precludes application of the
FDCPA to debt collectors filing stale
claims in bankruptcy are similarly
without support in the text or case
law. Rather than conflicting with the
Code, the proper application of the
FDCPA to debt collectors filing stale
claims in bankruptcy cases protects
debtors and preserves the integrity
of the bankruptcy claims process.
CONSUMER BANKRUPTCY JOURNAL
15