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11th Cir. Finds No Irreconcilable Conflict Between FDCPA and Bankruptcy Code

In a much-anticipated follow-up to its 2014 decision in Crawford v. LVNV Funding, LLC, 738 F.3d 1254 (11th Cir. 2014), the U.S. Court of Appeals for the Eleventh Circuit recently held that there is no irreconcilable conflict between the federal Fair Debt Collection Practices Act (FDCPA) and the Bankruptcy Code.

In so ruling, the Court reversed the dismissal of two FDCPA cases filed against debt buyers that submitted proofs of claim on debts that were subject to a statute of limitations defense.

A copy of the opinion in Johnson v. Midland Funding LLC and Brock v. Resurgent Capital Services, L.P. is available at: Link to Opinion.

As you may recall, in its 2014 decision in Crawford, the Eleventh Circuit held that a debt collector violates the FDCPA when it files a proof of claim in a bankruptcy case on a debt that it knows to be “time-barred.”  But the panel in Crawford did not consider whether the Bankruptcy Code preempts or displaces the FDCPA “when creditors misbehave in bankruptcy.”  Crawford at 1262, n. 7.

The action at hand arose from two appeals from the United States District Court for the Southern District of Alabama. The underlying lawsuits concerned FDCPA claims filed against debt buyers that filed proofs of claim in the plaintiffs’ Chapter 13 bankruptcy cases. The proofs of claim related to debts that, if sued upon, would have been subject to a statute-of-limitations defense based on Alabama’s six-year limitation period. The District Court dismissed both cases based on a finding that the Eleventh Circuit’s decision in Crawford placed the FDCPA and the Bankruptcy Code in irreconcilable conflict such that there was an implied repeal of the FDCPA by the Code.

The Eleventh Circuit recognized that a creditor is permitted to file a proof of claim on a debt subject to a statute-of-limitations defense, and the Court pointed out that when the “bankruptcy process is working as intended,” a time-barred proof of claim will not be paid by the bankruptcy estate.  The Court also noted that just because creditors are permitted to file proofs of claim on debts that are subject to a statute-of-limitations defense, they are not free from all of the consequences of filing these claims.

The Eleventh Circuit noted that creditors who meet the FDCPA’s definition of “debt collector” are a “narrow subset of the universe of creditors who might file proofs of claim in a Chapter 13 bankruptcy.” Under the FDCPA, debt collectors are prohibited from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. §1692e.  In addition, debt collectors may not use any “unfair or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. §1692f.

The Court reiterated its holding in Crawford that a debt collector’s filing of a proof of claim on a “time-barred” debt violates the FDCPA.

The Eleventh Circuit disagreed with the District Court’s finding that an “irreconcilable conflict” between the Bankruptcy Code and the FDCPA amounted to an implied repeal of the FDCPA by the Code.

Instead, the Eleventh Circuit held that the FDCPA and the Bankruptcy Code can be construed together in a way that allows them to coexist.

According to the Eleventh Circuit, the Bankruptcy Code and the FDCPA provide different tiers of sanctions for creditor misbehavior in bankruptcy. Under the Bankruptcy Code, a bankruptcy trustee can object to any time-barred proof of claim and the bankruptcy court will deny payment of the claim if it finds that the objection is proper. In addition, a bankruptcy court has the power to sanction a party for misbehavior that is more severe.

The Eleventh Circuit explained that the FDCPA, rather than conflicting with the Bankruptcy Code, provides an additional layer of protection from a particular type of creditor – i.e., a debt collector. The Court pointed out that although the Bankruptcy Code permits the filing of a proof of claim on a debt subject to a limitations defense, it does not require it.

Also, the Court noted, a debt collector may still file a proof of claim on a debt that it knows is beyond the applicable limitations period, so long as it is willing to subject itself to a potential action under the FDCPA.  The Court compared this to a frivolous lawsuit, ruling that nothing prohibits the filing of a frivolous lawsuit, but the filer will be subject to sanctions.

On the other hand, the Eleventh Circuit held, the debt collector who unintentionally or in good faith files a proof of claim on a debt subject to a limitations defense may find safe harbor in the FDCPA’s bona fide error defense.

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Brent Yarborough practices in Maurice Wutscher's Birmingham office in its Appellate, Commercial Litigation, Consumer Credit Litigation and Regulatory Compliance groups. He has substantial experience representing financial institutions, debt buyers and law firms. He has defended cases involving the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Truth In Lending Act, and various state law claims asserted against lenders and their assignees. He has also provided compliance advice on matters related to the FDCPA, UDAAP, and state debt collection and privacy laws. He is a frequent speaker to national audiences and publishes on topics related to consumer financial services regulation and litigation. For many years Brent served on the Executive Board of the Birmingham Bar Association’s Bankruptcy and Commercial Law Section. He also served on the Legislative Task Force of the Creditor Attorney Association of Alabama and is a past president of the Birmingham-Southern College National Alumni Association. He formerly served as Secretary of NARCA – The National Creditors Bar Association, after serving on its Board of Directors for eight years. In addition, he chaired NARCA’s Government and Regulatory Affairs Committee. Yarborough earned his B.A., cum laude, from Birmingham-Southern College and his J.D. from Cornell University, where he was Secretary/Treasurer of the Cornell Law School Moot Court Board. For more information, see

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