Intercreditor agreements between multiple lenders are part and parcel of lending to a company with several tranches of debt. Under section 510 of the United States Bankruptcy Code (the “Code”), “[a] subordination agreement is enforceable in a case under this title to the same extent that such agreement is enforceable under applicable nonbankruptcy law.” 11 U.S.C. § 510(a) (West 2017).
On May 15, 2017, the United States Supreme Court issued its decision in Midland Funding, LLC v. Johnson, 581 U.S. ___ (2017) in which it held that filing an “obviously time-barred” proof of claim in a bankruptcy proceeding does not violate the Fair Debt Collection Practices Act (FDCPA).
(Bankr. W.D. Ky. May 12, 2017)
The bankruptcy court enters summary judgment against the debtor holding the debt nondischargeable pursuant to 11 U.S.C. § 523(a)(4). The plaintiffs inherited a judgment against the debtor that was based on the debtor’s theft of the decedent’s property. The plaintiffs were the proper parties to bring the claim, as the decedent’s estate assigned the judgment to them, and the requirements of § 523(a)(4) were satisfied. Opinion below.
Judge: Lloyd
Attorneys for Plaintiffs: Crain – Schuette Attorneys, Amanda Lisenby Blakeman
Rue21 Inc. (“Rue21”) filed for Chapter 11 bankruptcy protection in Pittsburgh, PA on Monday (case no. 17-22045-GLT, Western District of Pennsylvania).
“The law has long treated unenforceability of a claim (due to the expiration of the limitations period) as an affirmative defense … And we see nothing misleading or deceptive in the filing of a proof of claim that, in effect, follows the Code’s similar system.”
Midland Funding, LLC v. Johnson, (May 15, 2017).
Overview
Earlier this week, the U.S. Supreme Court held that a creditor who deliberately files a bankruptcy proof of claim for a time-barred claim does not violate the Fair Debt Collection Practices Act (FDCPA). Midland Funding v. Johnson, No. 16-348, 581 U.S. __ (May 15, 2017) (slip op.). The 5-3 decision authored by Justice Stephen Breyer was met with a blistering dissent by Justice Sonia Sotomayor. While the decision will help unscrupulous debt collectors, it will likely hurt legitimate creditors such as banks.
On May 15, 2017, in the case of Midland Funding, LLC v. Johnson, the U.S. Supreme Court held in a 5-3 decision (Justice Gorsuch did not participate in the opinion) that a debt collector that files a proof of claim on a time-barred debt in a consumer bankruptcy does not violate the Fair Debt Collection Practices Act.
The Supreme Court of the United States held today that the filing of a proof of claim that is obviously time barred is not a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the Fair Debt Collection Practices Act (the "FDCPA").
Katy Industries, Inc., (OTC:KATY) a manufacturer, importer and distributor of commercial cleaning solutions and customer storage products, and 13 of its affiliates, has filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware (Lead Case No. 17-11101 KJC). The petiton lists between $1 and $10 million in assets and between $50 and $100 million in liabilities.