Just a few weeks ago, we wrote that a major question begging for Supreme Court consideration is whether a creditor can be held liable under the Fair Debt Collection Practices Act (“FDCPA”) when it files a proof of claim in a bankruptcy case to collect a time-barred debt. In May 2016 the Eleventh Circuit said yes; in July 2016 the Eighth Circuit said no (as long as the proof of claim is accurate and complete).
At the request of both the petitioning creditor and the responding debtor, the Supreme Court has agreed to review the Eleventh Circuit’s decision in Johnson v. Midland Funding, LLC, 823 F.3d 1334 (11th Cir. May 24, 2016). The questions to be examined by the Court are as follows:
(1) Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collections 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 stakes are high, particularly for collection companies and claims purchasers (like Midland Funding) that are most at risk for filing proofs of claims relating to time-barred debts. This will be a very hotly contested case with many amici curiae briefs likely to be filed. We hopefully will have a resolution to these issues by next summer.