11th Circuit Finds that Bankruptcy Code and FDCPA Can Coexist

Monday, June 6, 2016

In a recent decision from the Court of Appeals for the 11th Circuit, In re Johnson, the Court found that the Bankruptcy Code and the Fair Debt Collection Practices Act can coexist.  Whether an FDCPA claim may lie against a creditor filing a proof of claim in a bankruptcy case appears to be an open issue around the country.  The debtor in Johnson argued that a creditor has no right to file a proof of claim where the underlying debt may be time-barred. The Court disagreed and held that creditors may file such proofs of claim, but noted also that any unwarranted filing may have consequences under the FDCPA.  The case also closed an apparently open issue in the 11th Circuit as to whether the FDCPA is preempted by the Bankruptcy Code.  It is now clear, at least in the 11th Circuit, that FDCPA actions may be brought against creditors or debt collectors who file bankruptcy proofs of claim that they know are stale or unenforceable under state or other nonbankruptcy law.  A cautionary tale for creditors, especially for those in the bankruptcy claims trading market.  (Aleida Johnson v. Midland Funding, LLC, 11th Cir. 2016) 

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