2d Circuit Says Bankruptcy Code, Not FDCPA, Provides Exclusive Remedy for Erroneous Proofs of Claims by Creditor

In Simmons v. Roundup Funding, LLC, — F.3d —-, 2010 WL 3859609 (2d Cir. 2010), the Court of Appeals for the Second Circuit found that the bankruptcy code, not the FDCPA, provides the exclusive remedy for fraudulent or defective proofs of claim.

Bankruptcy provides remedies for wrongfully filed proofs of claim. “It is beyond cavil that past bankruptcy practice, as well as explicit Bankruptcy Code provisions, have left the remedy for fraudulent and otherwise defective proofs of claim to the Bankruptcy Code.” Baldwin, 1999 U.S. Dist. LEXIS 6933, at *14 (referencing 11 U.S.C. §§ 105, 1330); see also Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir.2002) (“Nothing in either [the Bankruptcy Code or the FDCPA] persuades us that Congress intended to allow debtors to bypass the Code’s remedial scheme when it enacted the FDCPA. While the FDCPA’s purpose is to avoid bankruptcy, if bankruptcy nevertheless occurs, the debtor’s protection and remedy remain under the Bankruptcy Code.”). These remedies include revocation of fraudulent proofs of claim and the court’s contempt power. See Baldwin, 1999 U.S. Dist. LEXIS 6933, at *14. Without seeking these remedies, the Simmons filed suit under the FDCPA. “Nothing in either the Bankruptcy Code or the FDCPA suggests that a debtor should be permitted to bypass the procedural safeguards in the Code in favor of asserting potentially more lucrative claims under the FDCPA. And nothing in the FDCPA suggests that it is intended as an overlay to the protections already in place in the bankruptcy proceedings.” Gray-Mapp, 100 F.Supp.2d at 814.