ALPHONSE D. OWENS v. LVNV FUNDING, LLC; TIA ROBINSON v. ECAST SETTLEMENT CORP., et al.; JOSHUA BIRTCHMAN v. LVNV FUNDING, LLC, et al.
United States Court of Appeals For the Seventh Circuit
Argued June 1, 2016 — Decided August 10, 2016
FLAUM, Circuit Judge. In each of these consolidated cases, a debt collector filed a proof of claim, defined as “a written statement setting forth a creditor‘s claim,”
I. Background
The three consolidated cases currently before us are similar in material respects. In each case, a debtor filed for bankruptcy under Chapter 13 of the Bankruptcy Code.1 The debtor was represented by counsel throughout the proceedings. In addition, a trustee was assigned to the case.
During the bankruptcy proceedings, a debt collector submitted a proof of claim for a “stale” debt, or a debt for which the statute of limitations had expired.2 The debt collector was not the original creditor, but instead a professional debt buyer who had purchased the stale obligation at a fraction of the debt‘s face value. As required by
Realizing that the debt was time-barred and thus subject to an affirmative defense, the debtor objected to the claim, which was disallowed and eventually discharged. Shortly thereafter, the debtor brought a separate suit in federal court against the debt collector, alleging that the act of filing a proof of claim on a time-barred debt constituted a false, deceptive, misleading, unfair, or unconscionable means of collecting a debt in violation of §§ 1692e and 1692f of the FDCPA.
In each case, the district court granted defendant‘s motion to dismiss under
Two of the decisions—Owens and Birtchman—involved the same defendant and were decided on the same day by the same district court judge. In those decisions, the district court rejected the argument that the act of filing a proof of claim was deceptive or unfair, noting that the defendant was entitled to do so under the Bankruptcy Code. The district court also observed that defendant‘s proof of claim was complete, accurate, and provided the date of the final payment; as such, the court concluded that the proof of claim was not false or misleading.
In Robinson, the district court likewise dismissed the plaintiff‘s complaint under Rule 12(b)(6), holding that filing a proof of claim on a time-barred debt was not a deceptive, false, or misleading debt collection practice. The plaintiff then filed an
II. Discussion
Plaintiffs contend that the district courts erred by granting defendants’ motions to dismiss. They maintain that filing a proof of claim on a stale debt misleads the debtor about the legal status of the debt and thus violates the FDCPA‘s prohibition against false, deceptive, misleading, unfair, and unconscionable debt collection practices.3 Their argument has two
components. First, plaintiffs allege that the act of filing a proof of claim on a time-barred debt is inherently misleading because “claim” is defined to include only legally enforceable obligations. In other words, plaintiffs contend that because the claim process in bankruptcy is reserved for enforceable obligations, filing a proof of claim on a stale debt falsely cloaks the underlying obligation with an air of legitimacy. Second, plaintiffs contend that filing a stale proof of claim is deceptive because, in practice, the debtor and his attorney sometimes fail to object to the claim, allowing the debt collector to collect on an unenforceable obligation. Plaintiffs rely on our case law holding that the FDCPA prohibits creditors from filing lawsuits to collect on stale debts. Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1079 (7th Cir. 2013). They allege that the rationale for this holding also applies in the bankruptcy context.
We review a dismissal under Rule 12(b)(6) de novo, accepting well-pleaded allegations in the complaint as true and drawing all reasonable inferences in the light most favorable to the plaintiffs. Parish v. City of Elkhart, 614 F.3d 677, 679 (7th Cir. 2010).
A. Definition of “Claim”
As an initial matter, we disagree with plaintiffs’ assertion that the term “claim” includes only legally enforceable obligations, and that filing a proof of claim on a stale debt is therefore per se illegal under the FDCPA. The Bankruptcy Code broadly defines a “claim” as a “right to payment, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured[.]”
Moreover, a “claim” is defined as a right to payment.
merely limits avenues of collection.“); Fleming v. Yeazel, 40 N.E.2d 507, 508 (Ill. 1942) (“[T]he statute of limitations controls the remedy for recovery of the debt, but the debt remains the same as before, excepting that the remedy for enforcement is gone.” (citation omitted)). In other words, a time-barred debt is still a debt, even if the creditor cannot file a collection suit. See Pearl-Phil GMT (Far E.) Ltd. v. Caldor Corp., 266 B.R. 575, 581 (S.D.N.Y. 2001) (“Thus, under the Code, a right to payment need not be currently enforceable in order to constitute a claim.“). We have also held that the fact that the statute of limitations has run does not mean that all avenues of collection are prohibited. See McMahon v. LVNV Funding, 744 F.3d 1010, 1020 (7th Cir. 2014) (holding that it is not “automatically improper for a debt collector to seek re-payment of time-barred debts” so long as the debt collector does not use deceptive practices). Implicit in this holding is the understanding that a creditor with a stale debt retains some right to payment, even if recourse is only grounded in the debtor‘s moral obligation to pay. Id. (observing that “some people might consider full debt re-payment a moral obligation, even though the legal remedy for the debt has been extinguished“).
Therefore, a “claim” in bankruptcy is “more extensive than the existence of a cause of action that entitles an entity to bring suit.” In re Keeler, 440 B.R. 354, 362 (Bankr. E.D. Pa. 2009) (citing In re Remington Rand Corp., 836 F.2d 825, 831-32 (3d Cir. 1988)); In re Grossman‘s, 607 F.3d 114, 121 (3d Cir. 2010) (holding that a “claim” can exist in bankruptcy notwithstanding an inability to commence an action under state law at the time of filing). Further support for this interpretation comes from the claim allowance process set forth in the Bankruptcy Code, which has been described as a “sifting process.” Gardner v. New Jersey, 329 U.S. 565, 573 (1947); see also Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 449 (2007)
(describing the claim allowance process). Once a debtor files for bankruptcy, a bankruptcy estate is created that consists of “all legal or equitable interests of the debtor . . . .”
payment.
Thus, the Bankruptcy Code contemplates that creditors will file proofs of claim for unenforceable debts—including stale debts—and that the bankruptcy court will disallow those claims upon the debtor‘s objection. Indeed, filing a proof of claim allows the debt to be processed in the bankruptcy proceeding, which is intended to be all-encompassing. In re Am. Reserve Corp., 840 F.2d 487, 489 (7th Cir. 1988) (“The principal function of bankruptcy law is to determine and implement in a single collective proceeding the entitlements of all concerned.“); In re Glenn, 542 B.R. 833, 841 (Bankr. N.D. Ill. 2016) (“Above all, bankruptcy is a collective process, designed to gather together the assets and debts of the debtor and to effect an equitable distribution of those assets on account of the debts. The more participation there is; the better this process works.” (citing Levit v. Ingersoll Rand Fin. Corp., 874 F.2d 1186, 1194 (7th Cir. 1989))); 1 NORTON BANKR. L. &
PRAC. 3d § 3:9 (2016) (“A fundamental principle of the bankruptcy process is the collective treatment of all of a debtor‘s creditors at one time.“). In fact, sometimes even Chapter 13 debtors—such as plaintiff Owens—list stale debts in the schedule of unsecured debts that they file with the bankruptcy court. This is because debts that are not brought to the bankruptcy court‘s attention (either by the debtor or by the creditor who files a proof of claim) will not be discharged, see
Because a claim [based on consumer credit debts] may have been sold one or more times prior to the debtor‘s bankruptcy, the debtor may not recognize the name of the person filing the proof of claim. Disclosure of the information required [under Rule 3001(c)(3)] will assist the
debtor in associating the claim with a known account. It will also provide a basis for assessing the timeliness of the claim.
These established procedures—the filing of the proof of claim, the opportunity to object, and the required disclosure on the proof of claim form—confirm that the Bankruptcy Code anticipates that creditors will file proofs of claim on stale debts. Nonetheless, plaintiffs maintain that we should rely on their limited interpretation of “claim.” The only support for their argument comes from a statement made in dicta by the U.S. Supreme Court in Pennsylvania Department of Public Welfare v. Davenport, 495 U.S. 552 (1990). In that case, the Court explained that a claim is a “right to payment,” and “a ‘right to payment’ is nothing more nor less than an enforceable obligation . . . .” Id. at 559.
Plaintiffs take this statement out of context. Davenport considered whether restitution obligations imposed in state criminal proceedings were “debts” as defined by
that a right to payment is “nothing more nor less than an enforceable obligation[.]” Id. at 559.
Taken in context, it is apparent that this statement was not intended to address the issue of whether a “claim” includes only enforceable obligations. See Johnson v. Midland Funding, LLC, 528 B.R. 462, 466-67 (S.D. Ala. 2015), rev‘d on other grounds, 2016 WL 2996372 (11th Cir. May 24, 2016) (noting that Davenport “cannot plausibly be read for the proposition that a ‘right to payment’ . . . ceases to exist the moment the statute of limitations expires“). Moreover, the Supreme Court‘s treatment of this subject in other cases conflicts with plaintiffs’ interpretation.
The Supreme Court has repeatedly recognized that Congress intended for the term “claim” to have “the broadest possible definition.” Davenport, 495 U.S. at 563-64 (internal quotation marks omitted); see also FCC v. NextWave Pers. Commc‘ns Inc., 537 U.S. 293, 302 (2003); Johnson v. Home State Bank, 501 U.S. 78, 83 (1991); Ohio v. Kovacs, 469 U.S. 274, 279 (1985). In Home State Bank, the Supreme Court explored
(quoting H.R. Rep. No. 95-595, at 309 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6266). Congress also explained: “By this broadest possible definition . . . the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case. It permits the broadest possible relief in the bankruptcy case.” H.R. Rep. No. 95-595, at 309 (emphasis added). Indeed, since Davenport, the Supreme Court has clarified that a “claim” merely includes a right to payment, which is nothing more nor less than an enforceable obligation. See NextWave, 537 U.S. 302-03.
We therefore decline to adopt plaintiffs’ limited interpretation of “claim” and hold that a proof of claim on a time-barred debt does not purport to be anything other than a claim subject to dispute in the bankruptcy case. Filing such a proof of claim is not inherently misleading or deceptive.
B. The FDCPA
The fact that the Bankruptcy Code permits creditors to file proofs of claim on stale debts does not conclusively answer the question presented in this case—whether defendants’ conduct violated the FDCPA. See Randolph v. IMBS, Inc., 368 F.3d 726, 731 (7th Cir. 2004) (holding that the Bankruptcy Code did not implicitly repeal the FDCPA). Thus, we must determine whether defendants’ attempts to collect on plaintiffs’ time-barred debts in bankruptcy were false, deceptive, or misleading under the FDCPA.
Plaintiffs argue that defendants’ conduct was deceptive or unfair because their business model depends on the reality that the debtor, the trustee, and the debtor‘s attorney will sometimes fail to object to the stale claims. In other words, plaintiffs contend that creditors take advantage of the fact that
the bankruptcy process will sometimes “break down and fail.” Plaintiffs rely on Phillips v. Asset Acceptance, LLC, supra, in which we held that filing a state court lawsuit to collect on a time-barred debt violates the FDCPA. 736 F.3d at 1078. In Phillips, we explained that suing to collect on an old debt was misleading or deceptive because the consumer might not recall the debt or have evidence to mount a statute of limitations defense; in fact, an unsophisticated consumer might not even be aware of the statute of limitations defense. And “even if the consumer realizes that she can use time as a defense, she will more than likely still give in rather than fight the lawsuit because she must still expend energy and resources and subject herself to the embarrassment of going into court . . . .” Id. at 1079 (quoting Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480, 1487 (M.D. Ala. 1987)). Plaintiffs contend that these concerns are likewise present in the bankruptcy context.
There is a circuit split on the issue of whether filing a proof of claim on a stale debt in bankruptcy is a misleading or deceptive act prohibited by the FDCPA. In Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1259-60 (11th Cir. 2014), cert.
The Second Circuit reached a different conclusion in Simmons v. Roundup Funding, LLC, 622 F.3d 93, 94 (2d Cir. 2010). In that case, the debtor objected to an inflated proof of claim
and the bankruptcy court ultimately reduced the claim by more than half. Id. at 95. The debtor then sued the creditor in federal court, alleging that the creditor violated the FDCPA by misrepresenting the amount of the debt. Id. The district court dismissed the suit and the Second Circuit affirmed. Id. The Second Circuit noted that federal district courts across the country have held that the act of filing a proof of claim in bankruptcy court is not an abusive debt collection practice proscribed by the FDCPA, even if the claim is invalid or unenforceable. Id. at 95-96. The Second Circuit reasoned that debtors who are under protection of the bankruptcy court do not need additional protection from debt collectors because the bankruptcy process affords sufficient remedies for abuse. See id. at 96.7 Recently, the Eighth Circuit relied on Simmons when rejecting a plaintiff-debtor‘s request to extend the FDCPA to time-barred proofs of claim in a case with nearly identical facts to the cases currently before us. See Nelson v. Midland Credit Mgmnt., No. 15-2984, 2016 WL 3672073 (8th Cir. July 11, 2016).
Like the Eighth Circuit, we decline to follow the Eleventh Circuit‘s approach. See id. at *2. As an initial matter, we note that the concerns identified in Phillips regarding the misleading or deceptive nature of the conduct are less acute when a proof of claim is filed in bankruptcy, especially in a counseled case, as opposed to when a lawsuit is filed in state or federal court.8 First, because the proof of claim is required to inform the debtor about the age and origin of the debt, the consumer need not have a memory of it or records documenting it to file an objection—the affirmative defense is evident on the face of the claim. See In re La Grone, 525 B.R. 419, 427 (Bankr. N.D. Ill. 2015) (“Under Bankruptcy Rule 3001(c)(3), a claim for credit card debt . . . must list the creditor who held the debt at the time of the account holder‘s last transaction, the date of the last transaction, the date of the last payment, and the date the account was charged to profit or loss . . . . [Therefore,] a debtor in bankruptcy should always have the information needed to determine whether the statute of limitations for a claim has expired.“). Second, as in the cases before us, debtors filing for bankruptcy are usually represented by attorneys who are familiar with the statutes of limitations for different types of
debt. Even in other cases, when the debtor proceeds pro se, a bankruptcy trustee who is duty-bound to object to improper claims is appointed to oversee the proceedings. In addition, a debtor who has initiated bankruptcy proceedings and thus demonstrated a willingness to participate in them is unlikely to give in rather than fight the claim.9
Significantly, the Eleventh Circuit‘s decision in Crawford is inapposite in light of our precedent. In Evory v. RJM Acquisitions Funding LLC, supra, we held that the “unsophisticated consumer” standard is not appropriate when evaluating whether communications made to a debtor‘s lawyer violated the FDCPA. 505 F.3d at 774. Rather, a court should evaluate whether the communications would be likely to mislead a competent lawyer. Id. at 775; see also Bravo v. Midland Credit Mgmt., Inc., 812 F.3d 599, 603 (7th Cir. 2016) (reaffirming the “competent attorney” standard).
It is undisputed that plaintiffs were represented by counsel at all stages of their bankruptcy proceedings. Further, as discussed, the bankruptcy process afforded additional protections, including the appointment of trustees who were duty-bound to “examine proofs of claims and object to the allowance of any claim that is improper.”
under a “competent attorney” standard. Bravo, 812 F.3d at 603.
We conclude that, under this standard, defendants’ conduct was not deceptive or misleading. Plaintiffs do not allege that the information contained in the proof of claim was misleading; instead, they admit that the proofs of claim set forth accurate and complete information about the status of the debts. See Donaldson, 97 F. Supp. 3d at 1038 (“A factual, true statement about the existence of a debt and the amount . . . is neither false nor deceptive.“); cf. Sheriff v. Gillie, 136 S. Ct. 1594, 1601 (2016) (noting that accurate statements are not false or misleading for purposes of the FDCPA). Therefore, to determine whether the statute of limitations had run, plaintiffs’ attorneys had to look no further than the proof of claim form, which included the date of the most recent payment. With that information, a reasonably competent lawyer would have had no trouble evaluating whether the debt was timely. See Birtchman v. LVNV Funding, LLC, No. 1:14-cv-00713, 2015 WL 1825970, at *8 (S.D. Ind. Apr. 22, 2015) (“A competent lawyer would undoubtedly be aware of the statute of limitations defense that is common in most areas of law and permitted by the Bankruptcy
We are not unsympathetic to plaintiffs’ concern that in certain cases, debtors and their representatives fail to object to claims for unenforceable debts, which then become part of the bankruptcy plan. This outcome harms not only the debtor, who is forced to pay a portion of the stale debt out of limited means, but also creditors with legally enforceable debts
whose share of the pie is reduced because an additional creditor is claiming a piece. See Crawford, 758 F.3d at 1261. But the risk of this outcome in such cases is not sufficient to support a FDCPA claim in the cases currently before us, where plaintiffs’ attorneys successfully objected to proofs of claim that were neither false nor misleading.
The dissent faults us for supposedly ignoring the realities of the bankruptcy process. To be sure, in certain cases, the debtor proceeds pro se and lacks the sophistication to understand that a claim for a stale debt is subject to disallowance, and the trustee does not abide by his statutory duty to review all claims filed in the debtor‘s case. Respectfully, the dissent attacks a straw man: this opinion does not foreclose relief under the FDCPA in cases involving such facts. We reiterate that any debt collection practice that “misleads an unsophisticated consumer to believe a time-barred debt is legally enforceable” violates the FDCPA. McMahon, 744 F.3d at 1020. The dissent decries a problem that is not present here—in these cases, the debtors were represented by attorneys and were able to secure complete discharge of the time-barred debts in their Chapter 13 bankruptcy proceedings without undue cost or burden.
Of course, if defendants had filed proofs of claim with inaccurate information, or had otherwise engaged in deceptive or misleading debt collection practices, plaintiffs would have a cause of action under the FDCPA. See McMahon, 744 F.3d at 1020; Phillips, 736 F.3d at 1079. But in these cases, the district courts did not err in concluding that plaintiffs had not stated claims for relief under the FDCPA.10
III. Conclusion
For the foregoing reasons, the judgments are AFFIRMED.
ALPHONSE D. OWENS v. LVNV FUNDING, LLC, et al.
Nos. 15-2044, 15-2082, 15-2109
United States Court of Appeals For the Seventh Circuit
WOOD, Chief Judge, dissenting. This court held, in Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1079 (7th Cir. 2013), that the Fair Debt Collection Practices Act (FDCPA),
It is helpful to begin with a brief review of the holdings of Phillips and McMahon. In Phillips, the plaintiff sought to bring a class action against a debt collector that had sued her after the statute of limitations on the underlying creditor‘s claim had run. If that was true, we said, citing Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 32-33 (3d Cir. 2011) (per curiam); Harvey v. Great Seneca Financial Corp., 453 F.3d 324, 332-33 (6th Cir. 2006); and Hekert v. MRC Receivables Corp., 655 F. Supp. 2d 870, 875-76 (N.D. Ill. 2009), the debt collector‘s suit violated the FDCPA. We followed up on that statement in McMahon. Nothing in McMahon suggested that a lawsuit based on a time-barred debt, or even a demand for payment under color of
legal right, is permissible, in the absence of an honest disclosure about the creditor‘s loss of the right to take legal action. Here is what we said:
We do not hold that it is automatically improper for a debt collector to seek re-payment of time-barred debts; some people might consider full debt re-payment a moral obligation, even though the legal remedy for the debt has been extinguished. But, as we held in Phillips, supra, if the debt collector uses language in its dunning letter that would mislead an unsophisticated consumer into believing that the debt is legally enforceable, regardless of whether the letter actually threatens litigation . . . , the collector has violated the FDCPA. Because it is plausible that an unsophisticated consumer would believe a letter that offers to “settle” a debt implies that the debt is legally enforceable, it was correct in Delgado to decline to dismiss the action at this stage, and incorrect to dismiss the class allegations in McMahon.
The proposition that a debt collector violates the FDCPA when it misleads an unsophisticated consumer to believe a time-barred debt is legally enforceable, regardless of whether litigation is threatened, is straightforward under the statute [citing
15 U.S.C. § 1692e(2)(A) , (5)].
744 F.3d at 1020. “Seeking” repayment is one thing: it could be accomplished by a polite, non-threatening letter advising the debtor of the debt‘s existence, and the fact that a lawsuit is time-barred. At most, the letter would represent an effort to
persuade the debtor to pay, based on whatever advantage payment might confer (perhaps a moral advantage, perhaps a boost to one‘s credit rating). This is in stark contrast with the use of any type of legal process, whether a suit in state court, a suit in federal court, or the filing of a claim in bankruptcy. Those are all an entirely different matter, and nothing in McMahon condoned any use of any type of court to collect a concededly stale debt. I take it that my colleagues agree with me that proceedings in bankruptcy court “count” as a form of judicial proceeding, given the fact that the bankruptcy court (a unit of the federal district court, see
The majority finds such a distinction in the definition of the word “claim” in the
Neither of those categories, however, covers a concededly stale debt. A claim based on such a debt is not contingent, because the expiration of the statute of limitations means that a lawsuit to collect it is no longer available. There is no event that could come to pass that could create an enforceable legal obligation for the debtor to pay up—at least no contingency that does not fall within the group of sharp or fraudulent practices that Phillips and McMahon hold are barred by the FDCPA. It is true that certain actions by the debtor can re-start the statute of limitations after it has run, but the debtor will not take those steps unless she is snookered into thinking that the debt is still legally enforceable. Cf. Suesz v. Med-1 Solutions, LLC, 757 F.3d 636, 639 (7th Cir. 2014) (en banc) (condemning collection tactic of suing in a court that is inconvenient to the debtor, hoping to obtain a default judgment “for a debt that the defendant doesn‘t actually owe“). We should not distort the meaning of the word “contingent” to include the possibility of the debt collector‘s successfully tricking the debtor into paying.
A stale debt is certainly not “unmatured.” If anything, it is overripe. Nor does the stale debt fit any other category in section 101(5)(A). I do not disagree with the notion, ante at n.4, that the list in section 101(5)(A) is illustrative. But it has not persuaded me that an effort to use legal process, hoping that the debtor (and others) will fail to spot a clear limitations defense, falls within either the enumerated possibilities or anything remotely related to them. Some things are simply too speculative, or too much against public policy, to include. A debtor could be induced to pay a fraudulent debt, too, but that does not mean that the Bankruptcy Code should be distorted into facilitating such a payment.
It is important in this connection not to view the Code in isolation from the Rules of Bankruptcy Procedure. The filing of a proof of claim, like any other “petition, pleading, written motion, and other paper,” is subject to
The concepts in Rule 9011 also supply a limitation on the rule that I would apply here. Where an old debt is subject to an
imagine a state of affairs in which a legally enforceable obligation exists. That leaves ample room for the operation of section 502(b)(1) of the Bankruptcy Code, which requires the bankruptcy court, upon objection from a party in interest, to disallow any claim that “is unenforceable against the debtor . . . under any . . . applicable law[.]” The statute of limitations is one such law,
My colleagues imply that debtors may actually be better off if the stale claims are submitted to the bankruptcy court, because if the debtor, her lawyer, and the trustee (or one of them) is vigilant, the filing of the proof of the stale claim will be a meaningless act: the time-barred debt will be disallowed, and the debtor will have the protection of the discharge judgment. See ante at 9-10 & n.6. That is cold comfort to the debtor who knows that the debt collectors are banking on those cases where no one spots the stale claim—a claim on which an independent lawsuit is already barred by McMahon and Phillips—and it instead winds up as a recoverable item. Sometimes people like the “belt-and-suspenders” approach, giving them redundant protection of one kind or another, but there is no justification for forcing this on them. The statute of limitations itself is full protection against a lawsuit on a stale claim; it does not need to be supplemented by a bankruptcy discharge. That is why the majority‘s comment that “a debt that is not discharged remains collectible, although the avenues for collection are limited,” ante at 10, misses the boat. A time-barred debt cannot be enforced in a legal proceeding, even if in a theoretical or moral sense the debt remains.
The majority also tries to shoehorn these stale debts into the “remote or contingent” language used by Congress in
H.R. Rep. No. 95-595. Ante at 13. But the stale debt is not “remote.” A debt owed by a third party to an entity owned by the debtor might be remote, or a debt Person A owes to Debtor, who then owes Creditor, might be remote. But the case before us now involves just a straightforward debt that could have been enforced until the statute of limitations expired. And I have already explained why these are not contingent debts—there are no contingencies, either anticipatory or after-the-fact, on which its legal collectability depends.
The reason this case is important is because the protections the majority believes exist in the bankruptcy courts are only as good as the human actors working in those courts. The majority notes, ante at 16, that “debtors filing for bankruptcy are usually represented by attorneys . . . .” But “usually” does not mean always. In the Bankruptcy Court for the Northern District of Illinois, in the first five months of 2016 there were 19,291 bankruptcy filings; of that number, 1,748 (about 9%) were pro se. Over the course of a year, it is reasonable to conclude that thousands of pro se litigants seek the services of that one court. They tend to be unsophisticated (that is often why they fell into financial trouble in the first place), and they easily could be buffaloed into thinking that every proof of claim represented a legal obligation, when the proof makes no mention of the limitations bar. It is unrealistic to think that the pro se litigant or the busy
My colleagues, ante at 19, accuse me of attacking a straw man when I highlight the possibility of abuse, particularly for pro se litigants. I beg to differ. They concede that the bankruptcy court will disallow the stale debt as soon as it learns about the limitations defense. Thus, as I indicated at the outset, the scheduling of this debt represents only the hope that it will slip through the cracks and be reborn as an allowed claim in bankruptcy. To the extent they are leaving the door open for an FDCPA claim when a bankruptcy petitioner (pro se or otherwise) is misled by the scheduling of the stale claim, I welcome that limitation, though its scope is unclear given the rationale the majority has adopted.
The majority stresses that there is an existing circuit split on this issue, and so we need only to line up on one side or the other. In keeping with our decisions in Phillips and McMahon, I would align this court with the Eleventh Circuit, see Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1259-60 (11th Cir. 2014), rather than the Second and Eighth, see Simmons v. Roundup Funding, LLC, 622 F.3d 93 (2d Cir. 2010); Nelson v. Midland Credit Mgmt., Inc., No. 15-2984, 2016 WL 3672073 (8th Cir. July 11, 2016). I would hold that the scheduling of a proof of claim on a debt that undisputedly is no longer collectible through judicial proceedings because the statute of limitations has expired violates the FDCPA.
I respectfully dissent.