In re Gatewood, a new case, by 8th Circuit BAP, and 11st Circuit Crawford case, disagree
In re Gatewood, a new case, by 8th Circuit BAP, and 11st Circuit Crawford case, disagree:
In Gatewood, a Bankruptcy Appellate Panel for the Eighth Circuit has held that a proof of claim filed by a creditor on an out-of-statute debt is not a violation of the Federal Fair Debt Collection Practices Act.
The debtors had urged the court to follow the Eleventh Circuit’s holding in Crawford v. LVNV Funding, LLC, 738 F.3d 1254 (11th Cir. 2014), which said debt-collector creditors who file a time-barred proof of claim in a Chapter 13 bankruptcy case engage in deceptive, misleading, unconscionable, or unfair conduct under the FDCPA. The Crawford court focused on the harm to the debtors and the bankruptcy estate caused by such a filing, in that the onus would be on either the trustee or the debtor to object to the claim, and if they did not, the claim would automatically be allowed and paid, at least in part, to the detriment of other creditors. This potential outcome was deemed unfair, unconscionable, deceptive, and misleading under the "least-sophisticated consumer" standard used by the Eleventh Circuit in FDCPA cases.
Crawford has been criticized by a number of bankruptcy courts in different circuits, finding that filing a proof of claim on a stale (beyond the statute of limitations) debt does NOT violate FDCPA. Here the Eighth Circuit BAP followed the trend:
"Filing in a bankruptcy case an accurate proof of claim containing all the required information, including the timing of the debt, standing alone, is not a prohibited debt collection practice" concluded the panel.