In late spring of 2016, the Eleventh Circuit Court of Appeals held that creditors could be liable under the FDCPA despite following prescribed bankruptcy rules of procedure. The decision of the Eleventh Circuit came in an appeal combining the cases of Johnson v. Midland Funding, LLC and Brock v. Resurgent Capital Services, L.P., 2016 U.S. App. LEXIS 9478 (11th Cir. May 24, 2016).
On October 11, 2016, the Supreme Court granted certiorari in Midland Funding, LLC v. Johnson, No. 16-348 to review the Eleventh Circuit’s holding in the Johnson and Brock cases. In Midland Funding, the Supreme Court granted certiorari with respect to the following questions:
1. Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collection Practices Act.
2. Whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, precludes the application of the Fair Debt Collection Practices Act to the filing of an accurate proof of claim for an unextinguished time-barred debt.
The Eleventh Circuit’s earlier holding further muddied the circuit's split on the first issue and created a split on the second. In an unusual set of circumstances, both parties urged the Supreme Court to review the matter. Loan Lawyers will monitor the case as it proceeds. For more information, please see our earlier blog about the 11th Circuit's holding in Johnson and Brock. Also, copies of the parties’ briefs in the present matter before the Supreme Court are available from the SCOTUS blog.
To review the 11th Circuit's holding, first understanding the FDCPA’s extraordinarily broad definition of “debt collector” is necessary, since the court restricted its holding to cases where the claim is filed by a ‘debt collector’ as defined by the FDCPA. The FDCPA specifically defines the term ‘debt collector’ to mean “any person who . . . regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.”
Based upon the 11th Circuit's holding in the prior two cases, these time-barred claims violate the FDCPA when filed specifically by a “debt collector,” even though the Bankruptcy Code ("Code"), specifically 11 U.S.C. § 501(a), allows a proof of claim for a debt barred by the statute of limitations to be filed.
Creditors may file proofs of claim in bankruptcy cases pursuant to 11 U.S.C. § 501(a). A "proof of claim" is a document filed by a creditor with the Bankruptcy Court to register a claim against the bankruptcy estate. The proof of claim sets forth the amount of the debt as of the date of the bankruptcy filing and the classification of the debt as either secured, unsecured, or priority.
In the appeal involving the Johnson and Brock cases, the 11th Circuit saw no conflict between the Bankruptcy Code and the FDCPA In holding that a debt collector filing a proof of claim in a bankruptcy case on a time-barred debt violates the FDCPA.
The court stated that the Code allows all creditors to file proofs of claim in bankruptcy cases, but does not protect these creditors from all liability. Thus, a particular subset of creditors, in this case, debt collectors, may be liable under the FDCPA for bankruptcy filings they know to be time-barred.
Stay tuned for the decision of the Supreme Court!The experienced South Florida defense attorneys at Loan Lawyers are here to review your potential claims against a debt collector, and will help you recover the damages you deserve. To schedule a free consultation at any of our three conveniently located offices, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).