Seventh Circuit Rules: Filing a Proof of Claim for Old Debt Is Okay — Circuits Split -

Owens et al. v. LVNV Funding LLC et al., Nos. 15-2044, 15-2082, 15-2109 (7th Cir. Aug.10, 2016) -

In Owens v. LVNV Funding LLC, a consolidated appeal, the Seventh Circuit Court of Appeals ruled "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." The court affirmed the rulings in three different district court cases that the defendants did not violate the Fair Debt Collection Practices Act (FDCPA). In so doing, the Seventh Circuit joins the Eight Circuit (see Nelson v. Midland Credit Mgmnt., No. 15-2984 (8th Cir. July 11, 2016)) and the Second Circuit (see Simmons v. Roundup Funding, LLC, 622 F.3d 93, 94 (2d Cir. 2010) in opposition to the reasoning of the Eleventh Circuit (see Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1259–60 (11th Cir. 2014), cert. denied, 135 S. Ct. 1844 (2015)).

The ruling is a significant affirmation of a creditor's right to participate in a debtor's bankruptcy estate. District courts, and now the Seventh Circuit, have rejected the argument that the act of filing a proof of claim on a stale debt is deceptive or unfair under the FDCPA. The rights granted to creditors under the Bankruptcy Code will now be less encumbered by the flood of claims spawned by the Crawford case. Dozens of "Crawfordstyle" claims currently stayed in the Seventh Circuit can now be dispatched because the filing of a proof of claim, even for a time-barred debt, is not a violation of the FDCPA.