On December 8, the Southern District of Indiana released a decision relating to the interplay between the Fair Debt Collection Practices Act and bankruptcy. In Grandidier v. Quantum3 Group, LLC, the District Court denied a motion to dismiss a plaintiff’s complaint relating to the supposed filing of a time-barred proof of claim in the plaintiff’s individual Chapter 13 bankruptcy case in alleged violation of the FDCPA.
The District Court’s ruling reflects a deepening jurisdictional divide over the question of whether courts can enforce violations of both the Bankruptcy Code and the FDCPA. The Court here succinctly accepts Seventh Circuit precedent, stating that “so long as people can comply with both, then courts can enforce both.” The Court then held that Quantum3’s decision to file a proof of claim qualified as an activity done in connection with the collection of a debt, thus bringing it within the purview of the FDCPA. Relying almost entirely upon recent Eleventh Circuit precedent, the Court held that Quantum3, by filing a time-barred proof of claim, was “trying to use the bankruptcy system to collect upon a debt” that it otherwise would not have been able to collect – the implicit assumption being that instituting (or threatening to institute) a lawsuit to collect outside of bankruptcy would have been a clear FDCPA violation.
It is important to note that the plaintiff in Grandidier, as opposed to others in prior Eleventh Circuit cases, was fully represented by counsel throughout his case and actually successfully objected to the allowance of Quantum3’s claim rather than confirming a plan that included repayment of the time-barred debt. Some had hoped that such distinctions would produce a different result in Grandidier, where no such injury to the debtor or other creditors occurred. Nonetheless, the Court declined to dismiss Grandidier’s complaint, which he filed after the claim’s disallowance, finding that his complaint stated an FDCPA claim upon which relief can be granted.
As we are seeing a greater increase in courts interpreting the FDCPA’s application in the bankruptcy context, it is important to monitor the trend for further developments that could implicate debt collection.