In Owen v. LNV Funding, LLC, 2016 WL 4207965, at *3 (7th Cir. 2016), the Court of Appeals for the Seventh Circuit found nothing inherently deceptive about filing stale proofs of claims in bankruptcy court.
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 11 U.S.C. § 1328(a), and a debt that is not discharged remains collectible, although the avenues for collection are limited. See McMahon, 744 F.3d at 1020. . . .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.
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. denied, 135 S. Ct. 1844 (2015), the Eleventh Circuit relied on Phillips to hold that it is. The Court reasoned that the act of filing the proof of claim “create[d] the misleading impression to the debtor that the debt collector can legally enforce the debt.” Id. at 1261. In so holding, the Eleventh Circuit relied on the “least sophisticated” consumer standard, which asks whether an unsophisticated consumer would be misled by the debt collector’s conduct. Id. 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. . . 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 Code.”). In sum, plaintiffs have failed to present any evidence that defendants engaged in deceptive, misleading, unfair, or otherwise abusive conduct prohibited by the FDCPA.