Midland Funding, LLC v. Johnson
The Court ruled that a debt collector did not break federal debt-collection law by filing a claim in someone's bankruptcy case for a credit-card debt that was clearly too old to be legally enforced.
The decision means debt buyers can keep filing these old claims in bankruptcy proceedings, leaving it to the bankruptcy trustee or the debtor to catch and object to them, rather than treating the filing itself as illegal.
How it got here: A federal trial court ruled the debt-collection law didn't apply and dismissed Johnson's suit; the Eleventh Circuit reversed; Midland asked the Supreme Court to review that reversal.
The Case in Depth
What happened
Aleida Johnson filed for Chapter 13 bankruptcy. Midland Funding, a company that buys old debts, filed a claim in her case seeking payment on a credit-card debt whose last charge was more than ten years earlier, well past Alabama's six-year deadline for suing over it. Johnson objected, the bankruptcy court threw out the claim, and she then sued Midland for allegedly violating federal debt-collection law.
The question before the Court
Can filing a bankruptcy claim for a debt everyone can see is too old to sue over count as an unfair or misleading debt-collection practice?
Why it matters
Debt buyers who purchase old, uncollectible debts cheaply can keep filing claims for them in bankruptcy cases without violating federal debt-collection law, so debtors and their trustees bear the burden of noticing and objecting to stale claims or risk paying money they no longer legally owe.
What changes now
This is a final merits ruling that resolves a split among the circuits on this exact question. The Eleventh Circuit's judgment favoring Johnson is reversed, meaning her lawsuit against Midland fails. Debt buyers can continue filing proofs of claim for time-barred debts in Chapter 13 bankruptcy cases without facing liability under the Fair Debt Collection Practices Act, unless Congress amends the law.
What this does not decide
The Court expressly did not decide whether filing an ordinary civil lawsuit (outside bankruptcy) to collect a debt known to be time-barred violates the debt-collection law — it assumed without deciding that lower courts finding that practice unfair were correct, limiting its holding to the bankruptcy-claim context.
Concurrences and dissents
Dissent — Justice Sotomayor
“It takes only the common sense to conclude that one should not be able to profit on the inadvertent inattention of others.”The dissent's core objection to allowing debt collectors to file stale claims.
Justice Sotomayor argued that filing a bankruptcy claim for a debt known to be time-barred is 'unfair' and 'unconscionable,' just like filing a lawsuit on such a debt. She rejected the majority's view that bankruptcy's trustee system and procedures reliably catch stale claims, citing statements from the government and trustees themselves that they cannot realistically spot every time-barred claim. She would have held debt collectors liable and let the practice be challenged as unfair.
How the Court got there
The legal reasoning, step by step
- The Court first asked whether Midland's claim was 'false, deceptive, or misleading' under the debt-collection law. It looked to the Bankruptcy Code's definition of 'claim' as simply a 'right to payment,' and to state law to see whether such a right still exists after a legal deadline passes.
- Under Alabama law, as in many states, a creditor's right to payment survives even after the time limit for suing expires — only the ability to sue in court is lost, not the underlying right. Because the claim still reflected a real 'right to payment' under this rule, it was not literally false or misleading to file it.
- The Court also reasoned that whether a statement misleads depends on the sophistication of the audience reading it. Because Chapter 13 bankruptcy proceedings include a trustee who understands that claims can be disallowed as too old, filing such a claim was not deceptive to that audience.
- Turning to whether the claim was 'unfair' or 'unconscionable,' the Court distinguished bankruptcy proceedings from ordinary lawsuits, where courts have found stale-debt claims unfair because unsophisticated consumers might unknowingly pay them. In bankruptcy, the Court reasoned, a trustee's oversight and the streamlined claims process make it less likely a stale claim will slip through unnoticed.
- The Court declined to carve out a bankruptcy-specific exception to the usual rule that expiration of a time limit is merely a defense the debtor must raise, reasoning that doing so would require line-drawing questions better left to Congress or bankruptcy rules rather than to a debt-collection statute with different aims and structure.