United States: Balancing Act: Supreme Court Rules That Filing A Proof Of Claim For Stale Debt Does Not Violate The Fair Debt Collection Practices Act

The U.S. Supreme Court has held that the filing of a proof of claim in bankruptcy proceedings with respect to time-barred debt is not a "false, deceptive, misleading, unfair, or unconscionable" act within the meaning of the Fair Debt Collection Practices Act ("FDCPA") when there continues to be a right to repayment after the expiration of the limitations period under applicable state law. The Court's decision in Midland Funding, LLC v. Johnson1 resolved a split among the federal courts of appeal about the application of the FDCPA to proofs of claim in bankruptcy proceedings. While the decision is favorable for creditors, applicable state law (Alabama, in this case) played a key role in the Court's conclusion that the creditor held a "claim" under the Bankruptcy Code. Creditors must be aware of and review the relevant state law in the jurisdiction of collection to determine whether the filing of a proof of claim could be deemed false, deceptive, or misleading.


In Midland Funding, the defendant-creditor filed a proof of claim in the plaintiff-debtor's Chapter 13 bankruptcy proceeding for unpaid, ten-year-old credit card debt.2 As such, the applicable six-year statute of limitations under Alabama law for an action to recover the subject debt had expired before the filing of the bankruptcy and the proof of claim.3 The bankruptcy court sustained the debtor's objection and disallowed the creditor's claim.4

After the bankruptcy court disallowed the claim, the plaintiff-debtor filed suit in the U.S. District Court for the Southern District of Alabama alleging, on behalf of herself and a putative class, that the filing of the proof of claim with respect to a time-barred debt violated the FDCPA. The district court dismissed the complaint, finding an "irreconcilable conflict" between the Bankruptcy Code and the FDCPA.5 The district court noted that because the Bankruptcy Code prevails where it is in conflict with the FDCPA, and because the Bankruptcy Code entitles a creditor to file a proof of claim on an outdated debt, there can be no liability under the FDCPA.6 The Eleventh Circuit reversed, holding that a "debt collector" who files a "knowingly time-barred proof of claim" in a Chapter 13 bankruptcy is not insulated from FDCPA liability even though the Bankruptcy Code allows the filing of a proof of claim for time-barred debt.7

The Supreme Court's Opinion

The Supreme Court granted certiorari to consider two questions: (1) whether the filing of an accurate proof of claim for an unextinguished, time-barred debt in a bankruptcy proceeding violates the FDCPA, and (2) whether the Bankruptcy Code precludes the application of the FDCPA to the filing of an accurate proof of claim for an unextinguished, time-barred debt.

In a 5–3 decision,8 the Supreme 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.9 The Court reasoned that under the applicable state law — here, Alabama — while the expiration of the statute of limitations provided a defense to a collection suit, it did not extinguish the underlying right to repayment of the subject debt. Therefore, the Court concluded, there was nothing "false, deceptive, or misleading" about the filing of a proof of claim that accurately stated the amount of debt owed.

While the Supreme Court observed that it was a "closer question," it nonetheless rejected the plaintiff-debtor's argument that filing an accurate proof of claim with respect to unextinguished, time-barred debt is "unfair" or "unconscionable."10 The Court concluded that while suing on a stale claim outside of bankruptcy might be unfair or unconscionable, the bankruptcy process — and, in particular, the involvement of the Chapter 13 trustee and the debtor's ability to object and obtain a disallowance of the claim — mitigates concerns about unfairness.11 In reaching its conclusion, the Court contrasted the FDCPA with the Bankruptcy Code and emphasized that they have "different purposes and structural features." The FDCPA seeks to "help consumers" by "preventing consumer bankruptcies in the first place," where the Bankruptcy Code "creates and maintains ... the 'delicate balance of a debtor's protections and obligations.'"12 The Court ultimately held that requiring creditors, prior to filing a claim, to investigate the merits of possible affirmative defenses –– which is typically the debtor's burden to assert and prove –– would upset the Bankruptcy Code's delicate balance.13

The Dissenting Opinion

Writing for the dissent, Justice Sotomayor explained that debt collectors act in bad faith by filing proofs of claim as to time-barred debt "hoping and expecting that the bankruptcy system will fail."14 Justice Sotomayor also expressed concern over what she sees as a practice to seek settlements or default judgments on debt for which the statute of limitations may have expired.15 Finally, the dissent noted a belief that permitting the filing of proofs of claims as to time-barred debt would add to the trustee's workload and could dilute the share of assets available for distribution to creditors with timely claims.16 Absent from this analysis, however, was a rejection of the principle that the expiration of a statute of limitations under the state law applicable in this case does not eliminate the underlying legal right to repayment.


In the wake of the Supreme Court's ruling in Midland Funding, creditors must continue to be mindful of the effect of a state statute of limitations on the underlying right to repayment when considering whether to file a proof of claim as to time-barred debt. Whether a particular state's statute of limitations extinguishes the underlying right to payment will be relevant to a determination of whether the filing of a proof of claim may implicate the FDCPA.17


1. No. 16-348, 2017 WL 2039159, ___ S. Ct. ___ (May 15, 2017).

2. Id. at *3.

3. Id.

4. Id.

5. Johnson v. Midland Funding, LLC, 528 B.R. 462, 473 (S.D. Ala. 2015), rev'd, 823 F.3d 1334 (11th Cir. 2016), rev'd No. 16-348, 2017 WL 2039159, ___ S. Ct. __ (May 15, 2017).

6. Id. at 471–73.

7. Johnson v. Midland Funding, LLC, 823 F.3d 1334, 1341 (11th Cir.), rev'd No. 16-348, 2017 WL 2039159, ___ S. Ct. ___ (May 15, 2017). ("[W]hen a particular type of creditor — a designated 'debt collector' under the FDCPA — files a knowingly time-barred proof of claim in a debtor's Chapter 13 bankruptcy, that debt collector will be vulnerable to a claim under the FDCPA.").  There was a split of authority between the Eleventh Circuit and the Fourth, Seventh, and Eighth Circuits; the latter had concluded that the filing a proof of claim on time-barred debt in a bankruptcy proceeding does not, per se, subject the claimant to suits under the FDCPA.  See DuBois v. Atlas Acquisitions (In re Dubois), 834 F.3d 522, 530–33 (4th Cir. 2016) (noting, in the normal course, "if a bankruptcy proceeds as contemplated by the Code, a claim based on a time-barred debt will be objected to by the trustee, disallowed, and ultimately discharged, thereby stopping the creditor from engaging in any further collection activity"), petition for cert. filed (Nov. 28, 2016); Owens v. LVNV Funding, LLC, 832 F.3d 726, 736 (7th Cir. 2016) (holding filing of stale proof of claim does not result in FDCPA liability), petition for cert. filed (Sept. 12, 2016); Nelson v. Midland Credit Management, Inc., 828 F.3d 749, 752 (8th Cir. 2016), petition for cert. filed (Dec. 13, 2016).

8. Justice Gorsuch took no part in the Supreme Court's decision.

9. Midland Funding, 2017 WL 2039159, at *8.

10. Id. at *6–7.

11. Id. at *7 ("These features of a Chapter 13 bankruptcy proceeding make it considerably more likely that an effort to collect upon a stale claim in bankruptcy will be met with resistance, objection, and disallowance.").

12. Id. at *8.

13. The majority noted that (1) when the Advisory Committee on Rules of Bankruptcy Procedure promulgated Rule 9011, it rejected a proposal that would have required a creditor's certification that there is no valid statute of limitations defense to a proof of claim, and (2) bankruptcy courts were split on whether the failure to investigate the statute of limitations before filing a proof of claim is sanctionable under Rule 9011. Midland Funding, 2017 WL 2039159, at *8.

14. Midland Funding, 2017 WL 2039159, at *13.

15. Id. at *12.

16. Id. at *13.

17. Creditors should consult with counsel as to the specific provisions of individual state statutes of limitations. Moreover, the obligations of Federal Rule of Bankruptcy Procedure 9011 continue to apply to persons signing proofs of claim, and a bankruptcy court may sanction a party for filing a claim where a reasonable inquiry would conclude that the claim is not warranted or the factual contentions therein lack evidentiary support. Under Federal Rule of Bankruptcy 3001, a proof of claim must provide certain information on claims for open-end or revolving consumer credit agreements, such as the last date of payment, the last transaction date, and whether the account was charged to profit and loss. Such information should assist a debtor or trustee in determining whether it is time barred.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.