The case the Supreme Court agreed to hear today, Midland Funding v. Johnson, involves both whether filing a proof of claim for a time-barred debt in a bankruptcy proceeding is debt collection activity that violates the Fair Debt Collection Practices Act and whether, if so, the Bankruptcy Code effectively preempts the FDCPA's application to bankruptcy filings.
The Court denied an industry petition on the subject last year (LVNV Funding, No. 14-858), in part because the company that petitioned had waived the Bankruptcy Code argument in the lower courts, and there was no clear split on whether the FDCPA, on its face, applied to and prohibited the filing of a proof of claim for time-barred debt. Since then, however, a number of new appellate decisions have been issued, and the court had before it at the same conference petitions from both a consumer and a debt collector challenging rulings by the Seventh and Eleventh Circuits, which the consumer respondent in Midland conceded were directly conflicting.
The situation made a grant quite likely, if not inevitable. The issue is of great importance because of what appears to be a widespread nationwide practice of filing proofs of claim for time-barred debts in consumer bankruptcies.