In Castellanos v. Midland Funding, LLC, 15-CV-559 (M.D. Fla. Jan. 4, 2016) the United States District Judge John Steele joined with several of his Middle District of Florida colleagues and held that the Bankruptcy Code preempts the FDCPA with respect to filing time-barred proofs of claim.
In Crawford v. LVNV Funding, LLC, the Eleventh Circuit held that filing a time-barred proof of claim in bankruptcy court violated the FDCPA. 758 F.3d 1254, 1262 (11th Cir. 2014) cert. denied, 135 S. Ct. 1844 (2015). To the contrary, the Bankruptcy Code permits creditors to file proofs of claim without regard to the statute of limitations. Id. at 1259. Although it recognized the inherent conflict, the Eleventh Circuit specifically “decline[d] to weigh in on . . . [w]hether the Code `preempts’ the FDCPA when creditors misbehave in bankruptcy,” and noted that its sister circuits are split on the issue. Id. at 1262 n.7
Following Crawford, a split has developed in the Middle District of Florida regarding whether or not the FDCPA provides a remedy for creditors who file time-barred proofs of claim. See Mears v. LVNV Funding, LLC, No. 14-CV-01333, 2015 WL 7067856, at *3 (M.D. Fla. Nov. 5, 2015) (the Bankruptcy Code precluded an FDCPA claim for a time-barred proof of claim); Neal v. Atlas Acquisitions, LLC, No. 14-CV-1113, 2015 WL 5687785, at *3-7 (M.D. Fla. Sept. 25, 2015); (same); but see In re Seak, No. 13-BK-5446, 2015 WL 631578, at *2 (Bankr. M.D. Fla. Jan. 22, 2015) (debtor may pursue FDCPA cause of action for filing a time-barred proof of claim).
Those opinions which found the FDCPA to be preempted in this context noted that the Bankruptcy Code already provides a remedial scheme for creditor misconduct and the filing of time-barred proofs of claim. Put another way, if FDCPA actions were allowed for time-barred proofs of claim, “debtors would be encouraged to file adversary proceedings instead of simply an objection to the creditor’s claim, which is incredibly inefficient and undermines the process provided by the Bankruptcy Code.” Neal, 2015 WL 5687785, at *6.
The Court in Castellanos found this logic persuasive and joined the majority view that the Bankruptcy Code, and not the FDCPA is the proper vehicle by which to address time-barred proofs of claim. The opinion expressly rejected In re Seak as “unpersuasive” and seems to consolidate the case law in the Middle District of Florida, for now, around the majority view.
A copy of the opinion in Castellanos can be found here.