STEPHANI W. HUMRICKHOUSE, Bankruptcy Judge.
The matter before the court is the motion to dismiss filed by defendants Genesis
For purposes of the motion to dismiss, the defendants adopted the statement of facts set out in the plaintiff's complaint, and the plaintiff adopted the defendants' statement of the bases upon which the court must assess the sufficiency of a complaint. See, e.g., Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
The plaintiff and debtor, Tony Lee Jenkins, filed a petition for relief under chapter 13 on July 26, 2010. The plaintiff filed a Schedule F which included "two claims allegedly owed to Discover Financial Services (hereinafter `Discover'), one in the amount of $4,637.47, and the other in the amount of $4,412.84; both such claims were listed by the plaintiff as `disputed.'" Complaint ¶ 15a. The plaintiff also listed a claim "allegedly owed to Nations Bank in the amount of $6,117.76; such claim was also listed by the plaintiff as `disputed.'" Id. ¶ 15b.
Defendant Vativ filed a proof of claim on behalf of Genesis Financial Services ("Genesis") in the amount of $13,554.02, based on "`unsecured merchandise and/or cash advances' purportedly made by the plaintiff." Id. at ¶ 16a. Genesis is a debt buyer based in Beaverton, Oregon, and registered to do business in North Carolina. Vativ is a debt collector based in Sugar Land, Texas, and provides "bankruptcy management" services to debt owners, including Genesis. Vativ indicated on the proof of claim that the debtor may have "scheduled [the] account as: DISCOVER CARD," that the present owner of the debt was Genesis, and that the claim was filed by Vativ "as agent for" Genesis. Id. at ¶ 16b. Vativ stated that the "Original Balance, Plan Balance and Current Balance were all $13,554.02." Id. at ¶ 16c.
Vativ filed a second proof of claim on behalf of Genesis with respect to the Nations Bank claim listed by plaintiff, in which Vativ identified Genesis as the present owner of the debt to Nations Bank and stated that it was filing the claim as agent for Genesis. Vativ stated that the "Original Balance, Plan Balance and Current Balance were all $18,716.66." Id. at ¶ 17c. The plaintiff asserts that Genesis acquired the claims after the underlying accounts were in default.
On October 11, 2010, the trustee filed an objection to confirmation and motion to dismiss based on the debtor's failure to make plan payments and to provide proof of filing of required tax returns, but withdrew the motion by notice dated November 3, 2010. The trustee filed a second objection to confirmation and motion to dismiss on February 11, 2011, stating that the debtor had failed to file a confirmable plan. On February 22, 2011, the debtor filed objections to both of the Genesis claims, alleging as to both that Genesis had failed to attach sufficient documentation as required by Rule 3001 of the Federal Rules of Bankruptcy Procedure and, separately, that collection of the claim was barred under North Carolina state law. The debtor argued that the claims were outside the statute of limitations and, further, that operation of new state statutes applicable to debt collection agencies both 1) preclude collection of a claim outside the statute of limitations and 2) require documentation
The court did not decide the objections to the Genesis claims because they were promptly withdrawn by Vativ on March 2, 2011. In each notice of withdrawal, Vativ stated that it was "permanently withdrawing" the claim on grounds that it was "wrongly filed." Despite Vativ's withdrawal of the claims, the debtor proceeded to file the instant adversary proceeding on March 4, 2011, asserting as counts in the complaint the same bases that previously were asserted in the objections to the claims. On March 28, 2011, the trustee withdrew his objection to confirmation and motion to dismiss.
The first count alleges violations of the Fair Debt Collection Practices Act ("FDCPA"). According to plaintiff, the defendants violated the FDCPA by filing proofs of claim that are "based on time-barred debts" and are not supported by sufficient documentation. In the second count, plaintiff contends that the act of filing these proofs of claim constitutes collection activity in violation of new North Carolina statutes applicable specifically, and only, to debt buyers and collection agencies. The operation of the new statutes is the catalyst for plaintiff's complaint and provides the underpinning for plaintiff's FDCPA claim. Plaintiff emphasized the significance of the new statutes during the hearing and acknowledged that but for their enactment, this adversary proceeding probably would not have been filed. Because under the new law the defendants have no legal right to collect payment, plaintiff argues, they also have no legal basis on which to assert a claim, such that their filed proofs of claim constitute unfair collection activity of the kind precluded by the North Carolina General Statutes and the FDCPA.
The legal questions raised by the plaintiff are intriguing. The court notes at the outset, though, that the facts of this case as alleged provide only a skeletal framework for the analysis the plaintiff asks this court to undertake. The plaintiff's complaint alleges in cursory fashion that the claims are precluded by applicable statutes of limitations and that the defendants should have known the claims were time-barred. The plaintiff simply states the following:
Complaint ¶ 21. The complaint does not cite or otherwise identify the applicable statute of limitation, and does not state the date on which the debtor contends such statute began to run, or expired.
Plaintiff contends that this case is unusual in that it is a "filing a proof of claim for a time-barred debt PLUS" case. In other words, the filing of these proofs of claim by these defendants was unlawful from the start and, plaintiff contends, defendants' status as collection agencies, coupled with the assumed fact that they knew or should have known the debt was time-barred, precluded them from even attempting to collect the debt through a suit, arbitration, "or otherwise." The filing of a proof of claim in this bankruptcy case was, under these circumstances, an unlawful attempt to collect a debt under the laws of the State of North Carolina and the FDCPA. Because plaintiff has made clear that his entire FDCPA argument is premised upon the state law argument, the court addresses that issue first. It proves to be dispositive.
Plaintiff asserts that defendants' filing of proofs of claim in the plaintiff's bankruptcy case is, by virtue of defendants' status as debt buyers and the claims' status as time-barred, an "attempt to collect any debt by the use of any unfair practices" within the meaning of North Carolina General Statute § 58-70-115. That statute sets out a non-exclusive list of unfair collection practices, two of which plaintiff claims were violated by the defendants:
N.C. Gen.Stat. § 58-70-115. Plaintiff also asserts that the proofs of claim constitute an "attempt to collect a debt ... by any fraudulent, deceptive or misleading representation" within the meaning of North Carolina General Statute § 58-70-110(4), which precludes a collection agency from "falsely representing the character, extent, or amount of a debt against a consumer."
The court is simply not persuaded that a creditor's filing of a proof of claim in a bankruptcy case constitutes an effort to
The FDCPA seeks to curtail abusive collection practices, as articulated in the Congressional findings and declaration of purpose: "There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy." 15 U.S.C. § 1692(a). The North Carolina statutes also forbid "fraudulent, deceptive or misleading representation" or "unfair practices" in the course of collecting a debt, and lists certain activities—all of them patently obvious—that a debt collector may not undertake, such as communicating with a consumer in a name other than his own, or using written communications that purport to be issued by a court or other authority. See, e.g., N.C. Gen. Stat. § 58-70-115. The debt collection activities the State of North Carolina seeks to curtail have virtually nothing in common with the filing of a proof of claim in bankruptcy court. The purpose of the state statute is, the court believes, similar to the goals of the FDCPA, and those goals are not advanced by plaintiff's action. As the court in B-Real, LLC v. Rogers explained, in the context of similar facts:
B-Real, LLC v. Rogers, 405 B.R. 428, 432 (M.D.La.2009) (citation omitted). The court is not persuaded that filing a proof of claim can constitute regulated "collection" activity within the meaning of any of the statutory provisions at issue in this matter.
Accepting plaintiff's construction also would run contrary to well-established meaning within the Bankruptcy Code itself. If filing a proof of claim constituted a "collection" activity, then filing proofs of claim under § 502(b) would be fundamentally at odds with language in § 362(a)(6) providing that the filing of a petition "operates as a stay, applicable to all entities, of ... any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title." Admittedly, the Bankruptcy Code has its share of internal inconsistencies, but these particular provisions are not at odds in that way.
The court is sympathetic to debtors who, when careless debt buyers or collection agencies file claims that are stale, inadequately reviewed, or otherwise flawed, find themselves in the position of having to take the avoidable step of objecting to a claim that should not have been filed in the first place. The issue is a real one, the problem is widespread, and it burdens both debtors and the courts. But in "vanilla" cases such as this, i.e. where there are no allegations of a pattern of conduct, an objection to claim is the more efficient and appropriate procedure by which to contest the conduct.
It is ordered that the motion to dismiss is
