WHEN FILING PROOF OF
CLAIM VIOLATES THE FAIR DEBT
COLLECTION PRACTICES ACT
By David Levin
Partner, Consumer Rights Litigation
www.UpRightLaw.com
T
he battle continues over whether
filing a proof of claim in a
Chapter 13 bankruptcy case for
a debt which is beyond the statute
of limitations violates the Fair Debt
Collection Practices Act (FDCPA),
15 U.S.C. §1692, et seq. As you may
recall from the article published in
our Spring 2015 issue, the Eleventh
Circuit Court of Appeals, in the case of
Crawford v. LVNV Funding, LLC, 758
F.3d 1254 (11th Cir. 2014), held that
under the FDCPA’s “least-sophisticated
consumer standard,” the filing of a timebarred proof of claim in bankruptcy was
“‘unfair,’ ‘unconscionable,’ ‘deceptive,’
and ‘misleading’ within the broad scope
of [15 U.S.C.] §1692e and §1692f.”
The Second Circuit Court of Appeals
had previously held that the filing of
a proof of claim in bankruptcy court
could not form the basis of an FDCPA
violation. Simmons v. Roundup
Funding, LLC, 622 F.3d 93 (2nd Cir.
2010). However, in Simmons, the
debtor had alleged that the proof of
claim filed misrepresented the amount
of the debt, as the bankruptcy court
reduced the claim from $2,039.21 to
$1,100.00. The debtor’s challenge to
the proof of claim was not related to the
statute of limitations issue.
Based upon this apparent conflict
between the circuits, the defendant in
Crawford filed a petition for certiorari to
the U.S. Supreme Court. In support of
its contention that there was a circuit
court conflict on this issue, the petitioner
also cited two other circuit court
opinions. However, those opinions,
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CONSUMER BANKRUPTCY JOURNAL
like Simmons, seem inapplicable to the
specific issue decided in Crawford.
In Buckley v. Bass & Associates, 249
F.3d 678 (7th Cir. 2001), a law firm
sent a letter to a consumer, seeking
information regarding the consumer’s
bankruptcy filing and the identity of
her attorney. The Seventh Circuit held
that there was no FDCPA violation,
but the reasoning had nothing to do
with the bankruptcy code. Based upon
the limited issue before it, the court
held that the letter was not the initial
communication with the consumer
in an attempt to collect a debt. The
petitioner also relied on the Ninth
Circuit’s opinion in Walls v. Wells Fargo
Bank, N.A., 276 F.3d 502 (9th Cir.
2002), which held that the Bankruptcy
Code precluded FDCPA claims based
upon the attempted collection of a
debt which had been discharged in a
Chapter 7 bankruptcy.
Apparently the Supreme Court agreed
that these various circuit court decisions,
although arguably somewhat related,
did not amount to a conflict among the
circuits on the actual issue decided
in Crawford. On April 20, 2015, the
Supreme Court denied the petitioner’s
writ of certiorari and declined to hear
the case. So for now, this battle wages
on. Neither the consumers nor the debt
buyers appear willing to give up on this
issue. Crawford led to the filing of many
FDCPA lawsuits based upon the filing
of stale proofs of claim in bankruptcy
and district courts around the country.
Such a lawsuit will almost always be
met with a motion to dismiss filed by
Summer 2015
the debt buyer defendant. Whether that
motion to dismiss is granted or denied
will likely depend upon the judge to
which the case is assigned, as courts
around the country are coming down
on both sides of the issue.
Take, for example, the Southern
District of Indiana. Six decisions from
this district have denied the debt
buyers’ motions to dismiss. See Smith
v. Asset Acceptance, LLC, 510 B.R.
225 (2013); Patrick v. PYOD, LLC, 39
F.Supp.3d 1032 (2014); Grandidier
v. Quantum3 Group, LLC, 2014
U.S. Dist. LEXIS 169279, 2014 WL
6908482; Patrick v. Worldwide Asset
Purchasing II, LLC, 2015 U.S. Dist.
LEXIS 17725, adopted at 2015 U.S.
Dist. LEXIS 30823 (magistrate judge’s
report and recommendation); Patrick
v. Quantum3 Group, LLC, 2015 U.S.
Dist. LEXIS 17721, adopted at 2015
U.S. Dist. LEXIS 30824 (magistrate
judge’s report and recommendation);
and Elliott v. Cavalry Investments, LLC,
2015 U.S. Dist. LEXIS 2423, 2015 WL
133745 (although this opinion is not
necessarily pro-consumer). However,
three recent decisions from this district
have granted the debt buyers’ motions
to dismiss. See Donaldson v. LVNV
Funding, LLC, No. 1:14-cv-01979-LJMTAB (April 7, 2015); Birtchman v. LVNV
Funding, LLC, No. 1:14-cv-00713JMS-TAB (April 22, 2015); and Owens
v. LVNV Funding, LLC, No. 1:14-cv02083-JMS-TAB (April 21, 2015).
Many varied arguments are raised
by debt buyers in motions to dismiss
FDCPA claims based upon Crawford.
National Association of Consumer Bankruptcy Attorneys