During the context of a bankruptcy wherein LVNV Funding, LLC allegedly filed time-barred proof of claims (past statute of limitations) in violation of Fair Debt Collection Practices Act (FDCPA), two consumers appealed a bankruptcy order dismissing claims against LVNV Funding.
A federal district court in Alabama[1] reviewed the bankruptcy court's order under the "limited and deferential clearly erroneous standard" afforded to bankruptcy judges.
The district court distilled the appeal to one issue: Does the FDCPA prohibit a debt collector from filing proof of claims in bankruptcy court seeking payments for time-barred debts?
No, held the court, affirming the bankruptcy court's ruling.
The court found that even a time-barred proof of claim is not the type of debt collection activity addressed by the FDCPA. The court noted, "appellants were never threatened; they were never tricked; they were never lied to or deceived – they were never even spoken to. The FDCPA seeks to remedy collection efforts that are abusive, unfair or deceptive.
Filing a proof of claim is not the same thing as attempting to collect a debt; it is merely a request to participate in the distribution of the bankruptcy estate under court control, held the court. Furthermore, deeming those filings "collection activities" under the FDCPA would foreclose all collectors' rights by virtue of the automatic stay imposed by § 362 of the Bankruptcy Code.
The risks attendant with a Kimber claim (threatening to sue/suing on a time-barred claim in civil court) are not present in bankruptcy court given the "structured environment" and protection afforded to even the most unsophisticated consumers.