A recent opinion by the U.S. Court of Appeals for the Eleventh Circuit held that it could be a violation of the Fair Debt Collection Practices Act (“FDCPA”) to file a proof of claim in a bankruptcy action based on a debt that is time-barred by state law statute of limitations. See Crawford v. LVNV Funding, LLC, et al., 758 F.3d 1254 (No. 13-12389, 2014 WL 3361226 (C.A. 11 (Ala.) July 10, 2014)). In Crawford v. LVNV Funding, LLC, the court analyzed the FDCPA and its prohibitions on, inter alia, false, deceptive, or unfair debt collection practices. 15 U.S.C. §§ 1692-1692p (2006).
The court analyzed that similar to filing a stale lawsuit in state court, a debt collector knowingly filing a time-barred proof of claim could create the misleading impression to the debtor that the debt collector can legally enforce the debt. The court explained that if the otherwise unenforceable time-barred debt got paid from the debtor’s future wages as part of his Chapter 13 repayment plan, the Court explained that such a distribution of funds to debt collectors with time-barred claims then reduces the payments to other legitimate creditors with enforceable claims. This court concluded that the filing of a time-barred proof of claim in the bankruptcy action could be unfair, unconscionable, deceptive, and misleading within the broad scope of § 1692e and § 1692f and in violation of the FDCPA by the debt collector.
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If you have questions about this article, please contact William “Pat” Huttenbach.