Eleventh Circuit: the Bankruptcy Code and the Fair Debt Collection Practices Act can coexist

Johnson v. Midland Funding, LLC, No. 15-11240 (11th Cir. May 24, 2016).

In 1977, Congress passed the Fair Debt Collection Practices Act to protect consumers from abusive debt collectors. Under the Act, a debt collector can’t sue or threaten to sue a consumer over a time-barred debt, because unsophisticated consumers probably wouldn’t think of invoking the statute of limitations against that debt. Plus, even if some consumers are more sophisticated, the passage of time might dull their memory or erode their records of the debt—leaving them simply unable to assert a statute-of-limitations defense. 

The question in this appeal is how this prohibition interacts with the Bankruptcy Code. The Code, as the courts have interpreted it, allows creditors to file time-barred claims against a debtor in bankruptcy. But a debt collector that chooses to do this, the Eleventh Circuit has earlier held, violates the Fair Debt Collection Practices Act, because its bankruptcy claim amounts to a threat to sue over a time-barred debt, if not a suit itself. 

The courts reconcile potentially conflicting statutes if at all possible, and here the Eleventh Circuit easily reconciles the Bankruptcy Code and the Fair Debt Collection Practices Act. The Code allows creditors to file time-barred claims, but it doesn’t shield them from any obligations they might have under the Act. And the Act’s obligations, at any rate, apply only to debt collectors—roughly, entities whose regular business it is to collect debts—and not to all creditors. The two legal regimes can coexist.