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Margaret Kinney v. HSBC Bank USA

Summarizing by Lars Fuller

Dubois v. Atlas Acquisitions LLC (In re Dubois)

Citation:
Dubois v. Atlas Acquisitions LLC (In re Dubois), No. 15-1945 (4th Cir. Aug. 25, 2016)
Tag(s):
Ruling:
The issue on appeal was whether Atlas violated the FDCPA by filing proofs of claim based on time-barred debts. The Fourth Circuit concluded that Atlas’s conduct did not violate the FDCPA and affirmed the bankruptcy court’s dismissal of Appellants’ FDCPA claims and related state law claims. In so ruling, the Fourth Circuit first concluded that the filing of a proof of claim is debt collection activity regulated by the FDCPA because the proof of claim is filed with the purpose of obtaining payment from the debtor’s estate. The court determined that for purposes of the FDCPA, it is irrelevant that the claim is paid by the debtor’s estate rather than the debtor personally. The court next considered whether filing a proof of claim based on a time-barred debt violates the FDCPA and concluded that when the statute of limitations does not extinguish debts, a time-barred debt falls within the Bankruptcy Code’s broad definition of a claim. Under applicable non-bankruptcy law (here, Maryland law), the statute of limitations does not extinguish a debt, but bars the remedy. Additionally, a stale debt may be revived if the debtor acknowledges the debt’s existence. Finally, the court considered whether filing a proof of claim on a time-barred debt violated the FDCPA notwithstanding that the Bankruptcy Code permits such filing. The court concluded that the filing of a claim in a chapter 13 case based on a time-barred debt does not violate the FDCPA when the statute of limitations does not extinguish the debt. Although agreeing that Atlas's time-barred claim is a "claim" under the Bankruptcy Code, Judge Diaz dissented as he could not agree that Atlas's alleged conduct is consistent with the FDCPA.
Procedural context:
Pursuant to 28 U.S.C. § 158(d)(2), the Fourth Circuit permitted Appellants to directly appeal the bankruptcy court's decision.
Facts:
Appellants Kimberly Adkins and Chaille Dubois filed separate Chapter 13 bankruptcy petitions in the Bankruptcy Court for the District of Maryland. Appellee Atlas Acquisitions, LLC filed proofs of claim in each of the bankruptcy cases based on debts that were undisputedly barred by Maryland’s statute of limitations. The debts were beyond Maryland’s three-year statute of limitations when Atlas purchased and attempted to assert the debts in the bankruptcy cases. Neither debtor listed the debt on their bankruptcy schedules nor did the Appellants send notice of the bankruptcy filings to Atlas. Adkins and Dubois filed separate adversary proceedings against Atlas and objected to the claims as being time-barred and further alleged that Atlas violated the Fair Debt Collection Practices Act (“FDCPA”) by filing proofs of claim on stale debts. Atlas conceded that its claims were based on time-barred debts and stipulated to their disallowance. However, Atlas moved to dismiss Appellants’ FDCPA claims under Rule 12(b)(6) for failure to state a claim upon which relief could be granted. After hearing consolidated oral arguments, the bankruptcy court concluded that filing a proof of claim does not constitute debt collection activity within the meaning of the FDCPA and granted Atlas’s motion to dismiss.
Judge(s):
Judge Albert Diaz, Judge Henry F. Floyd, and Judge Stephanie D. Thacker.

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