United States Bankruptcy Appellate Panel

For the Eighth Circuit

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No. 15-6008

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In re: Johnny Jr. Gatewood; Cheryl Gatewood

lllllllllllllllllllllDebtors

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Johnny Jr. Gatewood; Cheryl Gatewood

lllllllllllllllllllll Plaintiffs - Appellants

v.

CP Medical, LLC

lllllllllllllllllllll Defendant - Appellee

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Appeal from United States Bankruptcy Court 

for the Western District of Arkansas - Fayetteville

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 Submitted: June 2, 2015

 Filed: July 10, 2015

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Before KRESSEL, SALADINO and SHODEEN, Bankruptcy Judges.

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SALADINO, Bankruptcy Judge.
Mr. and Mrs. Gatewood appeal froman order of the bankruptcy court granting 1

summary judgment to the defendant in an adversary proceeding concerning a proof

of claim filed by the defendant on a time-barred debt. We have jurisdiction over this

appeal from entry of the bankruptcy court’s final order pursuant to 28 U.S.C.

§ 158(b). For the reasons set forth below, we affirm. 

FACTUAL BACKGROUND

The operative facts are not in dispute. Mr. and Mrs. Gatewood filed a Chapter

13 bankruptcy petition on October 7, 2013. Many of the unsecured non-priority debts

listed on their Schedule D are for medical services and include collection agents for

some of the debts. CP Medical’s agent timely filed a proof of claim on October 24,

2013. The Chapter 13 plan, proposing monthly payments of $124.00 over 36 months

and a pro rata distribution to unsecured creditors, was confirmed on December 5,

2013. However, Mr. and Mrs. Gatewood subsequently fell behind on their plan

payments and converted the case to a Chapter 7 in May 2015. 

After confirmation, but during the pendency of the Chapter 13 case, Mr. and

Mrs. Gatewood filed an adversary proceeding against CP Medical, LLC for monetary

damages caused by a violation of the Fair Debt Collection Practices Act (“FDCPA”),

15 U.S.C. § 1692 et seq. The amended complaint indicated that CP Medical’s proof

of claim was for medical services provided on February 27, 2011. Mr. and Mrs.

Gatewood assert that the bankruptcy and proof of claim filings were beyond

Arkansas’ two-year statute of limitations for the collection of a medical debt. They

further assert that by filing a claim on a debt that is time-barred, CP Medical engaged

The HonorableBen T. Barry, United States Bankruptcy Judge for the Western 1

District of Arkansas.

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in a “false, deceptive, misleading, unfair and unconscionable” debt collection practice

in contravention of the FDCPA.2

The parties filed cross-motions for summary judgment, and on February 6,

2015, the bankruptcy court granted CP Medical’s motion and denied Mr. and Mrs.

Gatewood’s motion. In doing so, the court relied on Eighth Circuit precedent holding

that no FDCPA violation occurs when a debt collector attempts to collect a

potentially time-barred debt that is otherwise valid unless there is actual litigation or

the threat of litigation. Order of Feb. 6, 2015, at 8. The court characterized the filing

of CP Medical’s proof of claim as a simple attempt to share in any distribution made

to listed creditors in the bankruptcy case, an action that does not rise to the level of

actual or threatened litigation. In denying Mr. and Mrs. Gatewood’s motion, the court

pointed out that the FDCPA and the Bankruptcy Code overlap but serve different

purposes, in that a bankruptcy debtor is protected from collection activities by the

Code and has other avenues to challenge claims the debtor believes are

unenforceable. The court ultimately held that the FDCPA is not the controlling statute

after a debtor files a bankruptcy petition. Mr. and Mrs. Gatewood then appealed. 

STANDARD OF REVIEW

We review de novo the bankruptcy court’s grant of summary judgment, and

will affirm the grant of summary judgment if there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law. Shaffer v. Bird

While the adversary proceeding complaint fails to identify which specific 2

sections of the FDCPA were violated, the operative language used in the complaint

appears to be referencing 15 U.S.C. §§ 1692e (which prohibits a debt collector from

using false, deceptive or misleading representations) and 1692f (which prohibits the

use of unfair or unconscionable means to collect a debt). More specifically,

15 U.S.C.§ 1692e(5) states that the threat to take any action that cannot legally be

taken is a violation of that section. 

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(In re Bird), 513 B.R. 104, 106 (B.A.P. 8th Cir. 2014); Ritchie Capital Mgmt., LLC

v. Stoebner, 779 F.3d 857, 860-61 (8th Cir. 2015). Here, there is no dispute as to the

material facts. Accordingly, we must review de novo whether CP Medical is entitled

to judgment as a matter of law.

DISCUSSION

Mr. and Mrs. Gatewood identify the issue on appeal as whether the filing of a

proof of claim that is supported by a debt time-barred under applicable state law (a

“stale” debt) constitutes a violation of the FDCPA, 15 U.S.C. §§ 1692e and 1692f,

as a means of debt collection that is either false, misleading, deceptive, unfair, or

unconscionable. To answer this question, we must determine whether, under the

FDCPA, the filing of a proof of claim in a bankruptcy case constitutes an attempt to

collect upon the debt and, if so, whether the filing of a proof of claim on a stale debt

is a debt collection action that is false, misleading, deceptive, unfair, or

unconscionable under the FDCPA.

Liability for violations of the sections of the FDCPA asserted in Mr. and Mrs.

Gatewood’s complaint can only arise from actions taken “in connection with the

collection of any debt.” 15 U.S.C. §§ 1692e and 1692f. Mr. and Mrs. Gatewood argue

that the filing of a proof of claim in bankruptcy is an act in connection with the

collection of a debt. We agree. 

We believe it is abundantly clear that the filing of a proof of claim in a

bankruptcy case is intended to result in some recovery for the creditor on the debt set

out in the proof of claim. See Dunaway v. LVNV Funding, LLC, 531 B.R. 267, 271

(Bankr. W.D. Mo. 2015) (citing LaGrone v. LVNV Funding, LLC (In re LaGrone),

525 B.R. 419 (Bankr. N.D. Ill. 2015), and Crawford v. LVNV Funding, LLC, 758 F.3d

1254, 1262 (11th Cir. 2014) (stating that “[f]iling a proof of claim is the first step in

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collecting a debt in bankruptcy and is, at the very least, an ‘indirect’ means of

collecting a debt.”)).

CP Medical argues that even if the filing of a proof of claim in bankruptcy

could be considered an action to collect a debt, it is not “litigation” or the “threat of

litigation” and, therefore, there is no violation of the FDCPA. For this proposition,

CP Medical cites to the Eighth Circuit Court of Appeals decision in Freyermuth v.

Credit Bureau Servs., Inc., 248 F.3d 767 (8th Cir. 2001), which held that, “in the

absence of a threat of litigation or actual litigation, no violation of the FDCPA has

occurred when a debt collector attempts to collect on a potentially time-barred debt

that is otherwise valid.” Thus, the question is whether the filing of a proof of claim

in a bankruptcy case is “a threat of litigation or actual litigation.”

In bankruptcy, the filing of a proof of claim is triggered by an act of the

debtor – the filing of the bankruptcy case. The debtor has a duty to file a list of

creditors. 11 U.S.C. § 521(a)(1)(A). Those creditors are then given the opportunity

to file a proof of claim. 11 U.S.C. § 501(a). A proof of claim is deemed allowed

unless a party in interest objects. 11 U.S.C. § 502(a). If an objection is filed to a

claim, the court will, “after notice and hearing,” determine the amount and allow the

claim unless it falls under one of several exceptions to allowance. One of those

exceptions is if the claim is unenforceable against the debtor and the property of the

debtor under applicable law. 11 U.S.C. § 502(b)(1). 

It is easy to see how the entire claims allowance process could be classified as

“litigation,” particularly since “notice and hearing” are required once an objection is

filed. Less clear, however, is whether the singular act of filing a proof of claim – an

act done solely to protect the creditor’s rights after receiving notice to do so – is

“litigation” for purposes of the FDCPA. In any event, the Eighth Circuit Court of

Appeals seems to have answered this question in the affirmative when itsaid: “When

a creditor files a proof of claim before the bankruptcy court, this amounts to a civil

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action to collect the debt, which arguably invokes the litigation machinery.” Lewallen

v. Green Tree Servicing, L.L.C., 487 F.3d 1085, 1091 (8th Cir. 2007) (citation

omitted). While the holding in Lewallen was not directly in the context of the

FDCPA, we agree that the filing of a proof of claim “arguably invokes the litigation

machinery.” Thus, Freyermuth does not stand in the way of an action under the

FDCPA based on a stale debt.3

The foregoing discussion leads usto the ultimate question on appeal – whether

the filing of a proof of claim on a stale debt is a debt collection action that is false,

misleading, deceptive, unfair, or unconscionable under the FDCPA. Mr. and Mrs.

Gatewood encourage us to follow the holding of the Eleventh Circuit Court of

Appeals in Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014), which

said debt-collector creditors who file a time-barred proof of claim in a Chapter 13

bankruptcy case engage in deceptive, misleading, unconscionable, or unfair conduct

under the FDCPA. The Crawford court focused on the harm to the debtors and the

bankruptcy estate caused by such a filing, in that the onus would be on either the

trustee or the debtor to object to the claim, and if they did not, the claim would

automatically be allowed and paid, at least in part, to the detriment of other creditors.

This potential outcome was deemed unfair, unconscionable, deceptive, and

misleading under the “least-sophisticated consumer” standard used by the Eleventh

Circuit in FDCPA cases.

Subsequent to the ruling in Crawford, many courts outside of the Eleventh

Circuit have considered the same question with an emphasis on the bankruptcy aspect

and have reached a different conclusion. The basis for that conclusion, finding that

Of course, Freyermuth does not stand for the proposition that a FDCPA 3

violation has occurred if there is any sort of litigation associated with a stale debt. It

only stands for the proposition that absent litigation or the threat of litigation, there

cannot be a FDCPA violation for trying to collect a stale debt. If there is litigation,

the decision still needs to be made as to whether the FDCPA has been violated. 

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filing a stale proof of claim is not grounds for an FDCPA action, focuses on the

protections already provided to debtors by the Bankruptcy Code, rendering the

Crawford court’s apprehensions about debt collectors taking advantage of debtors

unwarranted. 

The United States District Court for the Eastern District of Pennsylvania

recently addressed the question in an FDCPA action brought by a debtor against a

creditor who filed a proof of claim on a time-barred debt. The court weighed the

reasoning of Crawford, as well asthat of a Second Circuit case in which the court had

ruled that an inflated proof of claimdoes not give rise to an FDCPA violation because

“[t]here is no need to protect debtors who are already under the protection of the

bankruptcy court, and there is no need to supplement the remedies afforded by

bankruptcy itself.” Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2d Cir.

2010). The Pennsylvania court adopted Simmons’ rationale, noting that debtors are

protected by the bankruptcy court and court officers from abusive collection

practices, and the BankruptcyCode provides adequate remedies for potential creditor

misconduct. Torres v. Asset Acceptance, LLC, ___ F. Supp. 3d ___, 2015 WL

1529297 (E.D. Pa. Apr. 7, 2015) (appeal filed May 13, 2015). “Under these

circumstances, the Court will not insert judicially created remedies into Congress’s

carefully calibrated bankruptcy scheme, thus tilting the balance of rights and

obligations between debtors and creditors.” Id. at *7. 

In a recent case from within the Eighth Circuit, the bankruptcy court for the

Western District of Missouri granted summary judgment to a debt collector creditor,

ruling that while filing a proof of claim was an action to collect a debt for purposes

of the FDCPA, filing a proof of claim on a time-barred debt does not violate the

FDCPA. Dunaway v. LVNV Funding, LLC (In re Dunaway), 531 B.R. 267 (Bankr.

W.D. Mo. 2015). The Missouri bankruptcy court rejected the debtor’s request to

apply the Eleventh Circuit’s “least sophisticated consumer” standard for determining

the existence of a FDCPA violation. As that court aptly stated:

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While the FDCPA’s purpose is to protect unsophisticated

consumersfromunscrupulous debt collectors, that purpose

is not implicated when a debtor is instead protected by the

court system and its officers. See Simmons, 622 F.3d at 96.

The Court agrees that there are differences between

lawsuits filed against individuals and proofs of claim filed

in bankruptcy cases, all indicating that the deception and

unfairness of untimely lawsuits is not present in the

bankruptcy claims process. See LaGrone, 525 B.R. at 426.

531 B.R. at 273.

In addressing the FDCPA’s purpose of protecting unsophisticated consumers

from unscrupulous debt collectors, the Dunaway court specifically noted the

protections provided by the Bankruptcy Code that debtors outside of bankruptcy do

not enjoy when faced with a potential debt collection action. For instance, debtors in

bankruptcy often have their own attorneys, as well as trustees who owe fiduciary

duties to all parties and have a statutory obligation to object to unenforceable claims,

available to run interference for them and determine whether filed proofs of claim in

fact represent valid debts. If there is an issue with a proof of claim, the Bankruptcy

Code provides for a claims resolution process involving an objection and a hearing

to assess the amount and validity of the claim. This is generally a more streamlined

and less unnerving prospect for a debtor than facing a collection lawsuit. Id. In

addition, the court pointed out, the debtors have less atstake in claims allowance than

they would when facing enforcement of an adverse judgment in a collection action,

in that a creditor holding an allowed unsecured claimislikely to merely share pro rata

in the distribution of the pool of available funds and see the unpaid portion of its

claim discharged. Id. at 273-74. For these reasons, the court held, the filing of a proof

of claim on a stale debt does not constitute a unfair or deceptive debt collection

practice. 

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Other cases finding no violation of the FDCPA based on filing a claim for a

stale debt include Broadrick v. LVNV Funding, LLC (In re Broadrick), ___ B.R. ___,

2015 WL 3855251 (Bankr. M.D. Tenn. June 19, 2015); Donaldson v. LVNV Funding,

LLC, ___ F. Supp. 3d ___, 2015 WL 1539607 (S.D. Ind. Apr. 7, 2015); Torres v.

Cavalry SPV I, LLC , 530 B.R. 268 (E.D. Pa. 2015); Jenkins v. Genesis Fin. Solutions

(In re Jenkins), 456 B.R. 236 (Bankr. E.D.N.C. 2011); B-Real, LLC v. Rogers, 405

B.R. 428 (M.D. La. 2009); and Jacques v. U.S. Bank N.A. (In re Jacques), 416 B.R.

63 (Bankr. E.D.N.Y. 2009).

We find compelling the thoughtful analysis ofJudge Mashburn fromthe United

States Bankruptcy Court for the Middle District of Tennessee:

Using an unnecessarily sweeping interpretation of

the FDCPA to find even an accurate proof of claim, albeit

based on a stale debt, to be a violation of the FDCPA runs

counter to the Supreme Court’s “cardinal principle of

construction” to give effect to both laws. However, finding

that the bankruptcy claims process is so contradictory to

the FDCPA protections that the FDCPA must be

essentially ignored in every bankruptcy situation likewise

violates that important principle.

Thus, this Court rejects the holding in Crawford and

finds that not every filing of a proof of claim on a stale

claimis automatically a violation ofthe FDCPA. However,

going to the other extreme and finding, as Simmons did,

that the laws are so inconsistent that the FDCPA can never

be applied in the bankruptcy claims setting would be just

as contrary to the goal of making the two laws work

together to the extent possible.

Broadrick, ___ B.R. ___, 2015 WL 3855251 at *11-12.

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Here, the undisputed facts are that Mr. and Mrs. Gatewood listed in their

bankruptcy schedules the very debt upon which CP Medical filed its proof of claim.

Notice was given to CP Medical and its agents to file a proof of claim in order to

participate in any distributionsto unsecured creditors. Through its agent, CP Medical

filed a claimthat is on its face accurate and not misleading. There is nothing improper

about attempting to collect on a time-barred debtsince the debt remains. Freyermuth,

248 F.3d at 771 (stating “[a]s several cases have noted, a statute of limitations does

not eliminate the debt; it merely limits the judicial remedies available.”). Mr. and Mrs.

Gatewood are seeking a discharge of their indebtedness, including the debt owed to

CP Medical. In fact, they did not object to CP Medical’s claim. To then sue CP 4

Medical under the FDCPA for doing that which it was invited to do – file an accurate

proof of claim – offends the senses.

CONCLUSION

The FDCPA does not prohibit all debt collection practices. Instead, it simply

prohibits false, misleading, deceptive, unfair, or unconscionable debt collection

practices. Filing in a bankruptcy case an accurate proof of claim containing all the

required information, including the timing of the debt, standing alone, is not a

prohibited debt collection practice. Accordingly, the judgment of the bankruptcy

court is affirmed.

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As the Broadrick court noted, a debtor may actually desire to have a stale

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claim paid in bankruptcy. For example, there may be a co-signer who would

otherwise bear the burden of payment. 

In light of the decision here, it is not necessary to address the other arguments 5

raised in the parties’ briefs.

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