LVNV Funding filed a claim for debt that was charged off 20 years ago

[womanonfire]

I kid you not, charged off in 2002. And the one time the 11th Circuit rules for a consumer, which is rare, the Supreme Court overrules it with Midland Funding, LLC v. Johnson...

It's only Tuesday and I've already used up my face palms and eyerolls for the week...

[justbroke]

This is the standard. A time-barred claim only prevents the creditor from using process (lawsuit) to collect. It doesn't get rid of the debt. It doesn't get rid of the right to a payment. Nothing has ever stopped a creditor from still trying to collect on a time barred debt. Some will try to get the debt revived. This is why one should never talk to a creditor holding a time-barred debt.

I learned this in my bankruptcy back in 2008. When I filed for Chapter 13, American Express filed a claim from 1987. Yes, a 21-year old debt... which wasn't even mine as it was a corporate charge card. In any event, my judge said to just not try to object to the claim because they would get nothing int he bankruptcy, and the debt would summarily be discharged (their right to payment is extinguished by the bankruptcy).

This is why I always say... bankruptcy is the only way to guarantee that a debt will be noncollectable against you personally. (Secured debt is a different story, but they can only go after collateral with proper liens.)

(What a creditor could get in trouble for, and they have, is filing a claim in a bankrutpcy where the debt was already discharged in a prior bankruptcy. Doing such a thing can yield significant penalties. Companies, such as LVNV Funding and others, have learned that the hard way.)

[womanonfire]

I learned this in my bankruptcy back in 2008. When I filed for Chapter 13, American Express filed a claim from 1987. Yes, a 21-year old debt... which wasn't even mine as it was a corporate charge card. In any event, my judge said to just not try to object to the claim because they would get nothing int he bankruptcy, and the debt would summarily be discharged (their right to payment is extinguished by the bankruptcy).

Well, I didn't know this was common, dang I'm learning all kinds of fun stuff today!

If you do not object, then how does it not sneak in and get paid?

What actions might someone take that may revive a time-barred debt claim while in a bankruptcy? Can I send them an image of my middle finger or might they take that as me wanting to renew our relationship?

[flashoflight]

The debt is still valid. They can still call you and write you letters. They just can't sue you for it because of SOL. Or can they?

First you can be tricked into restarting the SOL. In California, the required SOL verbiage is in small print in the back of the letter while the front of the letter tries to trick you into paying something.

Aren't there some states where the creditor can sue SOL debt, get a default judgment, and the debtor has no way to get rid of the default judgment if it's been years? I'm not sure about this. The debtor has to file an answer with the affirmative defense of SOL within the 20-30 day time limit. Filing an answer costs money and time. And to add insult to injury, the debtor has to prove the SOL at trial if contested by the creditor.

Or you move to another state where the SOL is longer and still valid. Then the creditor can sue you after you move.

Or the SOL was tolled for some other reason such as COVID-19.

[justbroke]

Well, I didn't know this was common, dang I'm learning all kinds of fun stuff today!

I try to learn something every day.

If you do not object, then how does it not sneak in and get paid?

For time-barred debt (the statute of limitations has ran), a promise to pay or a partial payment may likely revive the responsibility to pay. This will also reset the SOL clock. That's why one should never even talk to a creditor that has a time-barred debt. A mere promise to pay could revive the debt.

What actions might someone take that may revive a time-barred debt claim while in a bankruptcy? Can I send them an image of my middle finger or might they take that as me wanting to renew our relationship?

I'll say this again because I like saying it. Bankruptcy is the only thing that permanently extinguishes a debt. There is no back-door reaffirmation of debt in a bankruptcy. A debtor can voluntarily pay a discharged debt, but that does not revive the debt and return it to collectable against the debtor. That's because a discharged debt is not just a time-barred debt; the liability to pay has been removed.

But, as flashoflight writes, raising the fact that the debt is time-barred to the SOL is a defense. It must be raised. But that gets into whether a default judgment that with proper service stands even if the debt was time-barred. So many questions on that front... and the case below should give you comfort but some concern (where the court "left for another day" whether silence on the fact that the debt is past the SOL, is misleading... goes to what flashoflight was mentioning with small print on back of the letter).

https://www.consumerfinancialserviceslawmonitor.com/2020/05/fifth-circuit-affirms-summary-judgment-for-plaintiff-in-time-barred-debt-case/

At least that's how I understand it.

[womanonfire]

I still don't understand why we do not object to this time barred claim and what the risk is of doing so. What measures do we take to make sure that it is excluded from payment? Is it because it was not listed on the schedules that it gets excluded from disbursement?

[justbroke]

We don't object to a time-barred creditor filing a claim in a bankruptcy because it would be discharged. Time-barred only means that the creditor can't use process to collect (a lawsuit). The right to payment never goes away simply because the SOL has passed. I think that's what we tend to forget... the SOL just keeps the creditor from using a lawsuit to collect but doesn't extinguish the debt or the creditor's right to payment.

[despritfreya]

Read this decision out of the 9th Circuit BAP (I do not think it was “published”):

https://casetext.com/case/lvnv-funding-llc-v-andrade-garcia-in-re-garcia

Objection to time barred claim was sustained by the Bankruptcy Court. Debtor then sought payment of attorney’s fees. The appeal deals with the attorney’s fees.

You would have to access PACER to get a copy of the ruling that sustained the objection in the Nevada Bankruptcy Court if you want to see why the Court disallowed the claim.

Des.

[justbroke]

despritfreya that's a pretty new case.

In my case, the creditor was going to get nothing since I first objected to the claim, and that objection was sustained. However I then moved to expunge the claim. From everything I had researched back then (in 2008!), the filing of a time-barred claim was not per-se any sort of violation of any rule. My goal was to prevent a distribution, not to attack on the rights of the creditor to file a time-barred claim under State non-bankruptcy law. My judge suggested that I not expunge the claim. Yeah, I tried to expunge the claim over just a disallowance... but withdrew the motion to expunge.

I can see where a debtor's attorney may want to recover their fee for needing to deal with the an otherwise time-barred claim. I mean, that was my whole idea with striking my 21-year old claim... preventing the creditor from getting any distribution should one be made.

(Looking back to my earlier response, I wrote that we don't object to them. I did object to them so that they would not be able to collect any distribution. I should have written that we don't do what I tried to do... strike/expunge them.)

[despritfreya]

justbroke

I have yet to object to a POC based upon the SOL. I would only object to a POC if such would benefit my client. In a less than 100% Chapter 13 there is no benefit. Even if it was 100%, I would have to weigh the cost of the objection (hourly rate - not much if no response but could be a lot if creditor responds) to the amount of the claim.

Des.

[justbroke]

despritfreya

That makes 100% absolute sense to me. Why worry about them getting a distribution. The responsibility to pay the debt would be summarily discharged regardless of whether they got $0 or their full claim.

But reflecting back, or trying to, 14 years ago... I think I was near the 109(e) debt limit and was trying to shave off anything I could. My objection was twofold, an SOL defense and that I didn't know of this debt (it wasn't mine).

[womanonfire]

Ok I am still not understanding how they would not get paid in a 100% plan without and objection or other motion. Isn't this what they are hoping for, no objection so they can sneak in?

I guess we should wait until all claims in and file omnibus objection because if it is common, there are likely to be more.

Edited to add that after reading LVNV Funding, LLC v. Andrade-Garcia (In re Garcia), that the Trustee could object but why should they in my case since they are working for the creditors? Oh and they hate debtors over here in my state, have I mentioned that before?

[justbroke]

They would get paid. The thing is... who cares if you're not in a 100% plan? (I think that is what despritfreya was trying to convey.) They do have a right to payment. The bankruptcy will definitely remove that right (discharge the personal responsibility to pay).

I think the theory is this: in a (substantially) less than 100% plan, the time-barred creditor would get pennies anyhow. In my 0% Chapter 13, the creditors would get nothing, so it's not worth the time to fight over nothing. If there are 109(e) debt limit issues or you're in a (close to) 100% plan, then that could be worth fighting.

But, alas, your attorney isn't going to be happy when they can't recover any fees from the time-barred creditor. That's what that 9th Circuit opinion seems to indicate. That may not be the law of the land, but it is persuasive.

[womanonfire]

They would get paid. The thing is... who cares if you're not in a 100% plan? (I think that is what despritfreya was trying to convey.) They do have a right to payment. The bankruptcy will definitely remove that right (discharge the personal responsibility to pay).

I think the theory is this: in a (substantially) less than 100% plan, the time-barred creditor would get pennies anyhow. In my 0% Chapter 13, the creditors would get nothing, so it's not worth the time to fight over nothing. If there are 109(e) debt limit issues or you're in a (close to) 100% plan, then that could be worth fighting.

But, alas, your attorney isn't going to be happy when they can't recover any fees from the time-barred creditor. That's what that 9th Circuit opinion seems to indicate. That may not be the law of the land, but it is persuasive.

I am in a 100% plan which is why I care.

[justbroke]

I am in a 100% plan which is why I care.

Des was speaking to your attorney caring about increased fees, to object, and not being able to recover the fee from the creditor. At least that's true in the 9th circuit.