Case Analysis: JPMCC 2007-C1 Grasslawn Lodging, LLC v. Transwest Resort Props., Inc. (In re Transwest Resort Props., Inc.), 881 F.3d 724 (9th Cir. 2018), Insolvency e-Bulletin, Insol. L. Comm., Bus. L. Sec., Cal State Bar (May 15, 2018)

Dear constituency list members of the Insolvency Law Committee, the following is a case update analyzing a recent case of interest:

 

SUMMARY

 

In JPMCC 2007-C1 Grasslawn Lodging, LLC v. Transwest Resort Props., Inc. (In re Transwest Resort Props., Inc.), 881 F.3d 724 (9th Cir. 2018), the U.S. Court of Appeals for the Ninth Circuit held that an election under section 1111(b)(2) of the Bankruptcy Code does not require that a chapter 11 plan contain full due-on-sale protections, and that section 1129(a)(10) of the Bankruptcy Code applies on a “per plan” (not a “per debtor”) basis.  To read the full published decision, click here:  http://cdn.ca9.uscourts.gov/datastore/opinions/2018/01/25/16-16221.pdf.

 

FACTS

 

In 2010, a group of five entities (collectively the “Debtors”) filed for chapter 11.  The Debtors consisted of one parent company, two “Mezzanine Debtors” that were owned by the parent company, and two “Operating Debtors” that were each owned by one of the Mezzanine Debtors.  Each Operating Debtor owned and operated a resort hotel.

 

The bankruptcy cases were jointly administered, but not substantively consolidated.  The Debtors filed a joint chapter 11 plan which did not (at least not expressly) propose to substantively consolidate the Debtors.

 

Undersecured creditor JPMCC 2007-C1 Grasslawn Lodging, LLC (“Lender”), was owed $247 million.  Its claim was against the two Operating Debtors and was secured by liens on the two hotels.  Pursuant to section 1111(b) of the Bankruptcy Code, Lender elected to have its claim treated as a fully secured claim.

 

In their plan, the Debtors proposed to pay Lender monthly interest-only payments for 21 years, with a balloon payment at the end of the term.  The plan included a due-on-sale clause which generally provided that Lender would be paid in full if the hotels were sold during the 21-year term, except that the hotels could be sold subject to the restructured loan between years 5 and 15 of the plan.

 

Under the plan, Lender’s claim comprised one of ten classes of claims.  A second class was comprised of secured claims originally held by another lender against the Mezzanine Debtors.  This second class was the only class of claims asserted against the Mezzanine Debtors.  After the plan was proposed, Lender acquired these claims and, therefore, controlled the only class of claims asserted against the Mezzanine Debtors.

 

Lender voted to reject the plan, and objected to confirmation of the plan on at least two grounds.  First, it argued that the 10-year exception to the due-on-sale clause would improperly allow the Debtors to partially negate the benefit of Lender’s section 1111(b) election.  Second, it argued that the plan did not satisfy section 1129(a)(10) because no class of creditors holding claims against the Mezzanine Debtors voted to accept the plan.

 

The bankruptcy court overruled Lender’s objections and confirmed the plan.  Ultimately, the district court affirmed on the merits.  On further appeal, the Ninth Circuit also affirmed.  Judge Milan D. Smith authored the Ninth Circuit’s opinion, and Judge Michelle T. Friedland filed a concurrence.

 

REASONING

 

The court started by rejecting Lender’s argument that, because it had made an 1111(b) election, the plan needed to provide that Lender would be paid in full if the hotels were sold.  Section 1111(b) allows an undersecured creditor to obtain certain benefits reserved for secured creditors.  But neither the plain language of section 1111(b) nor the broader context of chapter 11 requires that a plan contain a due-on-sale clause when a creditor makes an 1111(b) election.  Indeed, section 1123(b)(5) provides that a plan may modify secured creditors’ rights (and thereby remove due-on-sale clauses in prepetition loan agreements).  Further, as long as a secured creditor retains its lien, a cram-down under section 1129(b)(2)(A)(i) is permissible even when “the property subject to such lien[] is . . . transferred to another entity.”  Thus, “the statute expressly allows a debtor to sell the collateral to another entity so long as the creditor retains the lien securing its claim, yet the statute does not mention any due-on-sale requirement . . . .”

 

The court was careful to note that this does not mean that due-on-sale protections are wholly irrelevant to the question of whether a plan is “fair and equitable” under section 1129(b).  However, the court concluded that Lender had waived any argument that the Debtors’ plan was not “fair and equitable.”

 

The court then rejected Lender’s argument that when a plan is filed on behalf of multiple debtors in a jointly administered case, section 1129(a)(10) must be evaluated on a debtor-by-debtor basis.  Section 1129(a)(10) provides that if a class of claims is impaired under a plan, the plan may be confirmed only if at least one impaired class of claims accepts the plan.  The plain language indicates that Congress intended a “per plan” approach, not a “per debtor” approach.  The court observed that neither section 1129(a)(10) nor any other part of section 1129(a) distinguishes between single-debtor plans and multi-debtor plans.

 

In her concurrence, Judge Friedland acknowledged Lender’s argument that, despite being the sole creditor of the Mezzanine Debtors, it was unfairly deprived of the ability to object effectively to the reorganization of those debtors.  She opined that any unfairness did not result from the bankruptcy court’s interpretation of section 1129.  Instead, it resulted “from the fact that this particular reorganization treated the five Debtor entities as if they had been substantively consolidated. . . . Because there was no consensus over these bankruptcy proceedings, there should have been an evaluation [under In re Bonham, 229 F.3d 750 (9th Cir. 2000)] of whether substantive consolidation was appropriate before it (effectively) occurred.”  However, since Lender did not challenge the plan on that basis prior to confirmation, any objection on that ground was waived.  Nevertheless, Judge Friedland concluded:

 

[I]f a creditor believes that a reorganization improperly intermingles different estates, the creditor can and should object that the plan – rather than the requirements for confirming the plan – results in de facto substantive consolidation.  Such an approach would allow this issue to be assessed on a case-by-case basis, which would be appropriate given the fact-intensive nature of the substantive consolidation inquiry. . . .

 

AUTHOR’S COMMENTARY

 

The court’s adoption of the “per plan” approach in jointly administered cases is significant.  At least in this circuit, objecting creditors (such as Lender) can no longer buy up all of the claims against one debtor and then use that position to block confirmation or leverage a better deal for itself.  In some cases with many debtors, the ruling also will make the confirmation process more efficient.

 

The court’s statutory analysis of section 1129(b)(2)(A)(i) is correct.  There is nothing in section 1129(b)(2)(A)(i) itself that requires a reorganized debtor to pay off a secured claim when collateral is sold post-confirmation (regardless of whether the claimant made an 1111(b) election).  The real question is (or should have been) whether the plan was “fair and equitable.”  Though there may be more to the story, it seems remarkable that Lender never raised, or subsequently waived, that issue.

 

These materials were written by John N. Tedford, IV, of Danning, Gill, Diamond & Kollitz, LLP, in Los Angeles, California (jtedford@dgdk.com).  Editorial contributions were provided by ILC member Michael W. Davis of Brutzkus Gubner Rozansky Seror Weber LLP in Woodland Hills, California (mdavis@bg.law).   

 

Best regards,

 

Insolvency Law Committee

 

Co-Chair 

Radmila A. Fulton

Law Offices of Radmila A. Fulton

Radmila@RFultonLaw.com

 

Co-Chair 

John N. Tedford, IV

Danning, Gill, Diamond & Kollitz, LLP

JTedford@dgdk.com

 

Co-Vice Chair

Marcus O. Colabianchi

Duane Morris LLP

MColabianchi@duanemorris.com


Co-Vice Chair

Rebecca J. Winthrop
Norton Rose Fulbright US LLP
rebecca.winthrop@nortonrosefulbright.com

 

Return to  John N. Tedford, IV 

Non-Filing Spouses, Homestead Exemptions, and Voidable Transactions

The California Bankruptcy Journal has published an article by Michael G. D’Alba entitled “Non-Filing Spouses, Homestead Exemptions, and Voidable Transactions” (Volume 34, 2017, Number 2). A copy of the article may be obtained by emailing Mr. D’Alba at mdalba@dgdk.com.

California is a community property state, and Mr. D’Alba examines issues which arise when non-debtor spouses try to claim homestead exemptions in community property.

Mr. D’Alba discusses issues that arise when a spouse relocates from the marital residence, files for bankruptcy, and then fails to claim a homestead exemption in the martial residence.  Meanwhile, the non-debtor spouse continues to reside in the former marital residence.  The following issues, at a minimum, require prompt analysis on the part of the non-filing spouse, creditors, and the bankruptcy trustee:

  • If the debtor spouse has filed a list of exemptions, how does it affect the non-filing spouse’s rights?
  • Are there time periods in which the non-debtor spouse must act to assert his or her rights, and what are those time periods?
  • May the non-debtor spouse file a list of exemptions in the debtor spouse’s bankruptcy case?

Mr. D’Alba also examines what happens when one spouse transfers property to the other and files a bankruptcy case in which that transfer is avoided by the trustee as a fraudulent conveyance.  While there is an established prohibition of the debtor spouse claiming an exemption in the now-recovered property, can the transferee spouse claim a homestead exemption?  If so, what would be the basis to claim the exemption, and are there grounds to object?

The matrimonial law and bankruptcy law fields are complicated by themselves, but when they intersect there are particularly difficult questions which may arise.  Specialists in this area may be necessary, and Mr. D’Alba’s article provides a guide to some of the main issues requiring discussion.

Return to Michael G. D’Alba, Associate

Supreme Court Holds that the Fair Debt Collection Practices Act Does Not Impose Liability on a Creditor Who Files a Proof of Claim to Collect a Time-Barred Debt

In September, we wrote that a major question ripe for Supreme Court consideration was whether a creditor can be held liable under the Fair Debt Collection Practices Act (“FDCPA”) when it files a proof of claim in a bankruptcy case to collect a time-barred debt.  On May 15, 2017, in a 5-3 decision, the Supreme Court ruled in favor of debt collectors.  Midland Funding, LLC v. Johnson, ___ U.S. ___ (2017).

In or before mid-2003, Aledia Johnson (“Johnson”) took out credit with Fingerhut Credit Advantage.  Johnson’s last payment was made in May 2003, and the debt was “charged off” in January 2004.  The debt appears to have been sold a few times, and ultimately was owned by Midland Funding, LLC (“Midland”) — one of the nation’s largest buyers of unpaid debt.

In March 2014, Johnson filed a chapter 13 bankruptcy petition in Alabama.  Midland filed a proof of claim for $1,879.71, even though any suit to recover the debt would have been time-barred under Alabama’s 6-year statute of limitations.  Johnson objected to the claim, Midland did not contest the objection, and the bankruptcy court disallowed the claim.

Johnson then filed a lawsuit against Midland, seeking actual damages, statutory damages, attorneys’ fees and costs for violating the FDCPA.  The district court dismissed the lawsuit, but the 11th Circuit reversed.

The Supreme Court concluded that Midland’s filing of a proof of claim to recover a time-barred debt did not violate the FDCPA.  Among other things, the Court noted that in most states (including Alabama) creditors have the right to payment of a debt even after the limitations period has expired.  There are procedural rules which allow for a streamlined evaluation of claims in bankruptcy cases, and the Bankruptcy Code preserves the estate’s ability to raise affirmative defenses such as statutes of limitations.  Also, in chapter 7 and 13 cases there are relatively sophisticated trustees who examine proofs of claims and, where appropriate, pose objections.  Thus, in the Court’s estimation, Midland’s assertion of a time-barred claim was not “false, deceptive, or misleading,” “unfair” or “unconscionable.”

Justice Sotomayor filed a dissent, joined by Justices Ginsburg and Kagan.  In their view, the practice of filing claims in bankruptcy proceedings in the hope that no one notices that the debt is time-barred is both “unfair” and “unconscionable.”  The FDCPA was enacted to, among other things, beat back debt collectors’ practice of filing lawsuits to collect time-barred debts.  But that has not entirely halted the behavior; indeed, in 2015 Midland and its parent company entered into a consent decree with the Government prohibiting them from filing suit to collect time-barred debts and ordering them to pay $34 million in restitution.  Now, debt buyers have shifted their focus to bankruptcy cases, where they file time-barred proofs of claims in the hope that nobody notices that they are too old to be enforced.  In the dissenting justices’ view, these claims are not filed in good faith; indeed, they are filed in the hope and with the expectation that the bankruptcy system will fail.  Thus, they conclude, the practice of filing time-barred claims violates the FDCPA.

The majority places great trust in the bankruptcy system to weed out time-barred claims.  However, for small claims such as Midland’s claim in Johnson’s bankruptcy case (less than $2,000), debtors usually have little incentive to object and the cost to trustees and creditors of doing so is often prohibitive — even when it seems clear that the claim is time-barred and the claimant will not contest the objection.  And of course, whether a claim is time-barred is usually not clear from the face of the proof of claim.  If the Court had ruled in favor of Johnson, its ruling would have had a significant impact on debt collectors by making them responsible for ensuring that they don’t file time-barred claims.  Instead, absent a Congressional adjustment to the FDCPA or the Bankruptcy Code, its ruling will allow debt collectors to file, and sometimes get paid on, stale claims without fear of liability under the FDCPA.

Case Analysis: United States v. Martin (In re Martin), 542 B.R. 479 (9th Cir. BAP 2015), and Smith v. IRS (In re Smith), 828 F.3d 1094 (9th Cir. 2016), Insolvency e-Bulletin, Insol. L. Comm., Bus. L. Sec., Cal. State Bar (October 26, 2016)

SUMMARY

Last December, in United States v. Martin (In re Martin), 542 B.R. 479 (9th Cir. BAP 2015), the U.S. Bankruptcy Appellate Panel of the Ninth Circuit rejected recent circuit court decisions holding that an untimely Form 1040 is not, by definition, a “return” for purposes of determining whether a tax debt is dischargeable.  The BAP instead ruled that a court must examine the totality of the circumstances to determine whether the purported return was “an honest and reasonable attempt to satisfy the requirements of the tax law.”  To read the full published decision, click here:  http://1.usa.gov/1JziPUx.

When the BAP issued its ruling in December, this issue was already pending before the U.S. Court of Appeals for the Ninth Circuit.  On July 13, 2016, in Smith v. IRS (In re Smith), 828 F.3d 1094 (9th Cir. July 13, 2016), the Ninth Circuit declined to rule on the question of whether an untimely Form 1040 filed after an assessment can ever be a “return” for dischargeability purposes.  Instead, based on the facts of the case, the Ninth Circuit agreed with the lower court’s determination that the debtor had not made an honest and reasonable attempt to satisfy the requirements of the tax law.  To read the full published decision, click here: http://bit.ly/2bUkKrf.

BACKGROUND

Section 523(a)(1)(B) excepts from discharge a tax debt “with respect to which a [required] return . . . (i) was not filed or given; or (ii) was filed or given after the date on which such return . . . was last due . . . and after two years before the date of the filing of the petition.”  Also, section 523(a)(1)(C) excepts from discharge a tax debt “with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.”

Prior to BAPCPA, the term “return” was undefined in the Bankruptcy Code.  In determining whether a particular document qualified as a “return,” most courts adopted the following test developed by the Tax Court in Beard v. Commissioner of Internal Revenue, 82 T.C. 766, 777 (1984):

(1) there must be sufficient data to calculate tax liability;
(2) the document must purport to be a return;
(3) there must be an honest and reasonable attempt to satisfy the   requirements of the tax law; and
(4) the taxpayer must execute the return under penalty of perjury.

In 2005, BAPCPA added a “hanging paragraph” at the end of section 523(a).  For purposes of section 523(a), “the term ‘return’ means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.”  11 U.S.C. § 523(a) (emphasis added).

Particularly since BAPCPA was enacted, courts have struggled to determine when a filing constitutes a “return” for purposes of section 523(a)(1).  Four different approaches have been adopted:

(1) under the harsh “One-Day-Late Approach,” an untimely Form 1040 is not a return, even if it is filed only one day late;

(2) under the less harsh “Post-Assessment Approach,” a Form 1040 is not a return if it is filed after the IRS makes an assessment;

(3) under the “Totality-of-the-Circumstances Approach,” courts must take into account not just the timing of the tax filing, but also any evidence of the debtor’s good faith attempts to comply with the tax laws; and

(4) under the “No-Time-Limit Approach,” whether a document evinces an honest and genuine attempt to satisfy the tax laws depends on its form and content, not on when it is filed.

There is also a fifth approach – one favored by the IRS – which does not appear to have been adopted by any court.

IN RE MARTIN

In Martin, the debtors did not timely file Form 1040s for 2004, 2005 or 2006.  The IRS issued a notice of deficiency, at which point the debtors hired an accountant to prepare their tax forms.  The accountant completed and signed the Form 1040s in late 2008, but the debtors did not get around to signing and filing them until six months later.  Unfortunately for the debtors, the IRS made assessments, and started sending notices of the unpaid taxes, a few months before their Form 1040s were filed.  After the debtors filed their Form 1040s, the IRS accepted the Form 1040s and adjusted their tax liability based on the information set forth therein.

A few years later, the debtors filed for bankruptcy and filed a complaint seeking a determination that their tax debt was dischargeable.  The IRS argued that the debt was nondischargeable merely because the debt recorded by its assessment was not one with respect to which a return had been filed (this is the “IRS Approach”).

The bankruptcy court rejected the IRS Approach, adopted the No-Time-Limit Approach represented by the Eighth Circuit’s decision in In re Colsen, 446 F.3d 836 (8th Cir. 2006), and entered summary judgment in favor of the debtors.  The IRS appealed.

The BAP concluded that (at least as to federal tax returns) the hanging paragraph effectively codified the Beard test applied by courts prior to BAPCPA, except with certain enumerated exceptions not relevant to the appeal.  Therefore, the BAP examined the Ninth Circuit’s pre-BAPCPA adoption and application of the Beard test in In re Hatton, 220 F.3d 1057 (9th Cir. 2000).

According to the BAP, the Ninth Circuit held in Hatton “that we should use [the] version of the Beard test [adopted by the Sixth Circuit in In re Hindenlang, 164 F.3d 1029 (6th Cir. 1999)] . . . to determine whether the [debtors’] untimely tax returns qualify as tax returns for nondischargeability purposes.”  However, according to the BAP, the Ninth Circuit in Hatton did not actually adopt the Post-Assessment Approach adopted by the Sixth Circuit in that case.  Instead, based on how the Ninth Circuit analyzed the facts, the BAP concluded that the Ninth Circuit followed a Totality-of-the-Circumstances Approach.

Having concluded that the bankruptcy court incorrectly adopted the No-Time-Limit Approach, the BAP vacated the bankruptcy court’s judgment and remanded for further proceedings.  The BAP directed the bankruptcy court to consider “the number of missing returns, the length of the delay, the reasons for the delay, and any other circumstances reasonably pertaining to the honesty and reasonableness of the [debtors’] efforts.”

IN RE SMITH

In Smith, the debtor did not timely file a Form 1040 for 2001.  The IRS issued a notice of deficiency in 2006, which the debtor did not contest.  Instead, in 2009, the debtor filed a Form 1040 which purported to replace the “Substitute for Return” previously prepared by the IRS based on information it gathered from third parties.  The debtor’s Form 1040 actually reported a higher income than that previously calculated by the IRS, thereby increasing his tax liability.

After some time, the debtor filed for bankruptcy and sought to discharge his 2001 tax liability.  The question was whether the amount originally assessed by the IRS was dischargeable.  The bankruptcy court ruled that it was.  However, the district court reversed, adopting the Totality-of-the-Circumstances Approach.  In re Smith, 527 B.R. 14 (N.D. Cal. 2014).  The debtor appealed.

The Ninth Circuit did not expressly rule in favor of any one particular approach, but it acknowledged Hatton as binding precedent for these situations.  The panel expressly declined to decide whether a Form 1040 filed after the IRS makes an assessment can be a “return” for purposes of section 523(a) pursuant to the Post-Assessment Approach, and it passed on deciding the merits of the IRS Approach.  The court also did not consider, at least expressly, the One-Day-Late Approach or the No-Time-Limit Approach.  Instead, the court looked at the facts and determined that, in light of the amount of time the debtor waited to file his Form 1040, his “belated acceptance of responsibility” was not an honest and reasonable attempt to comply with the tax code, and therefore his Form 1040 did not qualify as a return for purposes of section 523(a)(1).

AUTHOR’S COMMENTARY

In light of Smith, courts in this circuit will likely follow either the Post-Assessment Approach (a Form 1040 is not a return if it is filed after the IRS makes an assessment) or the Totality-of-the-Circumstances Approach (courts must take into account not just the timing of the tax filing, but also any evidence of the debtor’s good faith attempts to comply with the tax laws).  Courts following the latter approach will examine the number of missing returns, the length of the delay, the reasons for the delay, and any other circumstances reasonably pertaining to the honesty and reasonableness of the debtor’s efforts.

However, in the author’s view, the No-Time-Limit approach is correct.  This is the approach adopted by the Eighth Circuit in Colson (a pre-BAPCPA case applying the Beard test) and by Judge Lee in Martin.  See In re Martin, 508 B.R. 717 (Bankr. E.D. Cal. 2014).  Based on the legislative history of the hanging paragraph, the origins of the Beard test, the Supreme Court’s decision in Badaracco v. Commissioner of Internal Revenue, 464 U.S. 386 (1984) (even if a Form 1040 is admittedly fraudulent, it is still a “return” unless the fraud is evident from the face of the document), and the existence of section 523(a)(1)(C), the author believes that whether a document evinces an honest and genuine attempt to satisfy the tax laws depends on its form and content, not on when it is filed.

This does not mean that dishonest debtors are off the hook.  Under section 523(a)(1)(C), a tax debt will not be discharged if the debtor filed a “fraudulent return,” or if the debtor “willfully attempted in any manner to evade or defeat such tax.”  The number of missing returns, the length of delay in filing returns, the reasons for such delay, and other circumstances pertaining to the honesty and reasonableness of the debtor’s efforts should be considered in connection with this inquiry under section 523(a)(1)(C).  But they should not be considered when determining whether a Form 1040 constitutes a “return” for purposes of section 523(a)(1).

Given the split among the circuits regarding the proper interpretation of the word “return” in section 523(a), this issue seems ripe for Supreme Court review.  The debtor in Smith filed a petition for certiorari on October 11, 2016, and responses to the petition are due in mid-November.  Martin actually would be a better vehicle for Supreme Court review, but since Martin was remanded for further fact-finding that case cannot reach the Supreme Court anytime soon.

These materials were written by John N. Tedford, IV, of Danning, Gill, Diamond & Kollitz, LLP, in Los Angeles, California (jtedford@dgdk.com).  Editorial contributions were provided by Michael T. O’Halloran of the Law Office of Michael T. O’Halloran in San Diego, California.

Thank you for your continued support of the Committee.

Best regards,

Insolvency Law Committee

Co-Chair
Asa S. Hami
SulmeyerKupetz, A Professional Corporation
Ahami@sulmeyerlaw.com

Co-Chair
Reno Fernandez
Macdonald Fernandez LLP
Reno@MacFern.com

Co-Vice Chair
Radmila A. Fulton
Law Offices Radmila A. Fulton
Radmila@RFultonLaw.com

Co-Vice Chair
John N. Tedford, IV
Danning, Gill, Diamond & Kollitz, LLP
JTedford@dgdk.com

Supreme Court to Decide Whether the Fair Debt Collection Practices Act Imposes Liability on a Creditor Who Files a Proof of Claim to Collect a Time-Barred Debt

timemoneyJust a few weeks ago, we wrote that a major question begging for Supreme Court consideration is whether a creditor can be held liable under the Fair Debt Collection Practices Act (“FDCPA”) when it files a proof of claim in a bankruptcy case to collect a time-barred debt.  In May 2016 the Eleventh Circuit said yes; in July 2016 the Eighth Circuit said no (as long as the proof of claim is accurate and complete).

At the request of both the petitioning creditor and the responding debtor, the Supreme Court has agreed to review the Eleventh Circuit’s decision in Johnson v. Midland Funding, LLC, 823 F.3d 1334 (11th Cir. May 24, 2016).  The questions to be examined by the Court are as follows:

(1)  Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collections Practices Act.

(2)  Whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, precludes the application of the Fair Debt Collection Practices Act to the filing of an accurate proof of claim for an unextinguished time-barred debt.

The stakes are high, particularly for collection companies and claims purchasers (like Midland Funding) that are most at risk for filing proofs of claims relating to time-barred debts.  This will be a very hotly contested case with many amici curiae briefs likely to be filed.  We hopefully will have a resolution to these issues by next summer.