A creditor who is owed a debt may collect it from the debtor through all legal means. State statutes of limitation impose a time period during which the creditor may pursue collection in court. After this period expires, the creditor’s claim, while still outstanding, is deemed time-barred under the law and the creditor cannot avail itself of the legal system to collect it. In Florida, the statute of limitations for bringing a lawsuit on a debt is four or five years, depending on the basis for the debt. Fla. Stat. §95.11 http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0000-0099/0095/Sections/0095.11.html

Many times, especially in the case of consumers, the creditor will sell the outstanding debt to a collection agency. Due to the abusive and deceptive collection practices of these agencies, Congress enacted the Fair Debt Collection Practices Act in 1977. The Act applies only to consumer debts and only to debt collectors, defined as someone who regularly collects debt or is in a business whose principal activity is the collection of debts. A creditor who is collecting a debt on its own behalf is not a debt collector under the Act.

A debt collector can be liable if its actions violate the provisions of the FDCPA. While a debt collector can attempt to collect on a time barred debt, it walks a fine line in attempting to collect on such a debt and must be ever mindful of the FDCPA provisions.https://www.consumer.ftc.gov/articles/0117-time-barred-debts

It is not uncommon for a consumer dealing with phone calls from debt collectors to avail him/herself of the Bankruptcy Court. Can the debt collector file a proof of claim in the bankruptcy case for the time-barred debt? Is filing the proof of claim a violation of the FDCPA? Can the debtor bring an action against the debt collector for violations of the FDCPA?

In Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1261 (11th Cir. 2014) the court held that a debt collector violates the FDCPA and may be held liable when it files a proof of claim in a bankruptcy case on a debt that it knows to be time-barred, even if the claim is valid. The court reiterated this position in Johnson v. Midland Funding, LLC, 823 F.3d 1334 (11th Cir. 2016). The Eleventh Circuit’s decision conflicts with decisions of the Fourth, Seventh and Eighth Circuits which hold that the filing of a time-barred, but otherwise valid and accurate proof of claim, does not violate the FDCPA.

Further the Eleventh Circuit found that the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, does not prohibit the filing of a valid, though time-barred, proof of claim. However, debt collectors who file claims which they know to be time-barred can be held liable under the FDCPA. The Court found no conflict between the Bankruptcy Code and the FDCPA and held that the Code did not preclude the application of the FDCPA. This holding is in conflict with a decision from the Ninth Circuit.

Faced with conflicting Circuit opinions on two substantial issues, the Supreme Court granted certiorari in the Johnson case on October 11. As of yet no date has been set for arguments in the case, but hopefully we will have some finality on the issues presented in the case namely: (1) Whether the filing in bankruptcy of an accurate proof of claim for a valid, but time-barred debt violates the FDCPA and (2) Whether the Bankruptcy Code precludes the application of the FDCPA.

Stay tuned!