BK Appeals Court Overturns Attorney’s Fee Award Over Time-Barred Claims

The Bankruptcy Appellate Panel, Ninth Circuit, has overturned a bankruptcy’s court ruling that awarded a debtor attorney’s fees after a debt collector filed proofs of claim that were time-barred.

A copy of the ruling in the case of LVNV Funding v. Andrade-Garcia can be accessed by clicking here.

The debtor filed for Chapter 7 bankruptcy protection in September 2017, which she converted to a Chapter 13 filing a few weeks later. In February 2018, LVNV filed three proofs of claim for accounts that were charged off in 2004 and which had a last transaction date that occurred in 2006. While the trustee did not object to the claims, the debtor did. Under state law in Nevada, the debtor filed a petition for attorney’s fees, arguing that the time to commence an action on the claims had expired more than a decade earlier. LVNV conceded that the claims were time-barred, but argued the debtor should not be entitled to attorney’s fees. A bankruptcy court judge ruled in favor of the debtor and awarded $3,732 in attorney’s fees — a decision which LVNV appealed.

In overturning the ruling, the Bankruptcy Appeals Court agreed with LVNV that the state law that was used should not be applied because the proofs of claim filed by LVNV were not “groundless.”

“We agree with the bankruptcy court that filing patently time-barred claims imposes burdens on chapter 13 trustees, debtors, and the judicial system,” the Appeals Court wrote. “These claims will be disallowed in virtually every case where an interested party objects, but they require that interested party to expend resources to file an objection … Bankruptcy courts may have discretion under certain state statutes to award attorney’s fees for disallowed time-barred claims, and fees may be awarded under Nevada law if provided for in a contract, but” the law in question “does not provide the authority.”

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