Alabama Bankruptcy Court holds that filing a proof of claim based on a time-barred debt does not violate the FDCPA

In Jenkins v. Midland Credit Management, Inc., 14-40226-JJR13, AP No. 14-40040-JJR (Bankr. N.D. Ala. Sept. 17, 2015) the U.S. Bankruptcy Court for the Northern District of Alabama held that filing a proof of claim based on a time-barred debt does not violate the FDCPA. The decision appears at odds with the Eleventh Circuit’s opinion in _In re Crawford_, 758 F.3d 1254 (11th Cir. 2014), which held that filing a proof of claim on a time-barred debt abridges the FDCPA’s prohibition on using unfair, unconscionable, deceptive and misleading means to collect a debt under the FDCPA’s least sophisticated consumer standard. But _Crawford_ expressly declined to decide the question of whether the Bankruptcy Code’s comprehensive claims-allowance procedure precluded the imposition of FDCPA penalties when the debt collection activity was simply the filing of a proof of claim – as the Second and Ninth Circuit Courts of Appeals have held – because the debtor did not raise that argument. The District Court in Jenkins, by contrast, was presented with the question and determined that such a claim is precluded by the Code. The Jenkins court agreed with the creditor that the idea that the FDCPA penalizes the filing of a proof of claim on a time-barred debt loses traction in light of the Code’s procedural framework for allowing and disallowing claims, the Code’s broad definition of claim as a right to payment, and Alabama case law holding that a creditor retains a right to payment for time-barred debt even though such debt may not be judicially enforceable. The FDCPA must yield to the Code and Rules under these facts, and the debtor’s sole recourse in response to an objectionable claim was within the claims allowance process set forth in the Code. The court further held that the filing of a proof of claim on a stale debt does not merit sanctions under Bankruptcy Rule 9011 where the proof of claim was filed in compliance with the Code. Note that the validity of the court’s reasoning will be decided by the Eleventh Circuit in _Johnson v. Midland Funding, LLC_, (Case No. 15-11240), which raises the issue of whether the Bankruptcy Code displaces the FDCPA.

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