Balancing these competing concerns, we described the presumption against retroactive application in the following terms: If Congress has done so, of course, there is no need to resort to judicial default rules.
Supreme Court held that filing of a proof of claim for unextinguished time-barred debt is not a per se violation of the Fair Debt Collection Practices Act.
Midland Funding LLC v. In ruling in favor of the creditor, the court affirmed that the statute of limitations is an affirmative defense to payment, which may be raised by the debtor or trustee in a claims objection, but does not prevent the creditor from filing a claim in the first instance.
Although a positive development for financial institutions, a closer analysis of the majority opinion reveals a number of issues meriting careful consideration. Among other points discussed below, claimants should examine state law before filing a claim to determine whether the applicable statute of limitations has merely barred suit or extinguished the underlying debt.
The proof of claim included an account summary indicating that the last payment on the debt was received in and that the account had been charged off in January The debtor objected to the claim the day after it was filed on the basis that it lacked supporting documentation.
On the same day that the bankruptcy court expunged the claim, the debtor commenced a class action against Midland in federal district court for violation the FDCPA.
In particular, the debtor asserted: Defendants then engage in collection practices, including the filing of proofs of claim in bankruptcy, in the hope and expectation that inaction on the part of many debtors will result in payment on this otherwise unenforceable debt.
Midland did not dispute that the debt was time-barred. Relying on its ruling in Crawford v. In a decision, the court held that the filing of a proof of claim in bankruptcy proceedings for a time-barred debt does not violate the FDCPA when there continues to be a right to repayment after the expiration of the limitations period under applicable state law.
The creditor lodges its claim against the estate, not the debtor personally. Yet, a closer inspection provides interesting takeaways.
Would it apply only to statute of limitations defenses or to other affirmative defenses as well? In contrast, the dissent focused on the harm to the bankruptcy system itself. Sanctions and Rule Rule imposes sanctions on a party that presents a claim to the court where reasonable inquiry would conclude that the claim is not warranted or the factual contentions therein lack evidentiary support.
Creditors would be wise to pay heed to this part of the Midland Funding decision. Phoebe WinderAndrew C. Glass and Sean R.
Blase is a partner in the firm's Boston and New York offices. The opinions expressed are those of the author s and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc.
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