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it is in conflict with the FDCPA, and because the Bankruptcy Code entitles a creditor to file a proof of claim on an outdated debt, there can be no liability under the FDCPA.6 The Eleventh Circuit reversed, holding that a "debt collector" who files a "knowingly time-barred proof of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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions