This document discusses issues related to time barred mortgages in bankruptcy. It notes that both state and federal law are unclear on this issue. Filing a proof of claim on a time barred debt could violate the Fair Debt Collection Practices Act. The statute of limitations for mortgages in Florida is 5 years from acceleration, while the statute of repose is generally 20 years from execution. However, federal law may preempt these in some cases like with FDIC or SBA assigned mortgages. The document also discusses tolling provisions and issues around determining when a mortgage is time barred.

1. TIME BARRED MORTGAGES
IN BANKRUPTCY 2.0
Joseph Towne, Esq.
Lender Legal Services, LLC

2. Why is this issue important?

3. Why is this issue important?
- Both State and Federal Law are in a deep state of
disagreement and flux
- Filling a Proof of Claim on a consumer debt Barred
by the Statute of Limitations or Repose may be a
Fair Debt Collection Practices Act violation.

4. Why is this issue important?
- Debtors can use negative notice and a motion to determine
secured status under 11 U.S.C. § 506 as a core proceeding
to discharge mortgages in bankruptcy court after
confirmation. See In re Brown, 2014 WL 983532 (Bankr. M.D.
Fla.) Quiet Title as an adversary proceeding may also
available.
- Attorneys who file Proofs of claim on a time barred debts may
be subject to penalties under Bankruptcy Procedure Rule
9011
- Candor to the court under Fla. R. Prof Conduct 4-3.3(a)(1)

5. FDCPA Liability-Recent Cases
- Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir.
2014).
- Facts: Creditor regularly purchases stale debts and files
proofs of claim in bankruptcy court. Creditor filed a proof of
claim on a debt barred under Alabama law and debtor filed
an adversary proceeding alleging FDCPA violation. Creditor
admitted that the debt at issue in this case would be
unenforceable in state court and the creditor.

6. FDCPA Liability
- Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir.
2014).
- Held: since the debt was unenforceable under state law, filing
a proof of claim was an FDCPA violation.
- The reasonable consumer standard applies to proofs of
claims filed by attorneys in the bankruptcy context

7. FDCPA Liability
- However the second circuit, the Northern District of Illinois,
Southern District of Illinois, and the Eastern District of
Pennsylvania hold that a proof of claim on a time barred debt
is not an FDCPA violation

8. FDCPA Liability- LVNV Strikes Back
- Donaldson v. LVNV Funding, LLC, 1:14-cv-01979-LJM-TAB;
2015 WL 1539607 (S.D. Ind. 2015 April 7, 2015).
- Facts: Debtor files Ch.13. LVNV files proofs of claims on
credit cards that were barred under Indiana law because
more than 6 years passed from the last payment made.
Debtor files complaint for violation of the FDCPA.

9. FDCPA Liability- LVNV Strikes Back
- Donaldson v. LVNV Funding, LLC, 2015 WL 1539607 (S.D.
Ind. 2015 April 7, 2015).
Held: Not false or deceptive when debtor lists debt on his
schedules.
Under Indiana law debt was still owed even though it was
barred.
Applied the competent lawyer standard, not least
sophisticated consumer standard

10. FDCPA Liability
Torres v. Asset Acceptance, LLC, 2015 WL 1529297 (E.D. Pa.
Apr. 7, 2015)
Facts: Debtor files a Chapter 13 in 2013. Creditor files a proof
of claim for small debt with a last payment and transaction of
June 10, 2002 outside of Pennsylvania’s four year statute of
limitations. Debtor files a complaint for violation of FDCPA.

11. FDCPA Liability
Torres v. Asset Acceptance, LLC, 2015 WL 1529297 (E.D. Pa.
Apr. 7, 2015)
Held: Not possible to sue under the FDCPA for any violation in
a proof of claim filed under the Bankruptcy Code.
The remedies under the Code (9011) were sufficient
“the Court will not insert judicially created remedies into
Congress’s carefully calibrated bankruptcy scheme, thus
tilting the balance of rights and obligations between debtors
and creditors.”

12. FDCPA Liability
Bad News:
We don’t live in those jurisdictions
So how do we avoid liability until SCOTUS
resolves the conflict?
First, find out if your debt is barred

13. State Law:
Its not just the place you find the homestead
exemption anymore
Choice of law for determining the
limitations statute for mortgages is the
same under both Federal and Florida –
local laws of situs subject to preemption

14. State Law:
Its not just the place you find the homestead
exemption anymore
- Judgment – collateral estoppel law of the state is
applied to determine judgment’s preclusive effect
- However, the bankruptcy court retains exclusive
jurisdiction to determine dischargeability. St.
Laurent v. Ambrose, 991 F.2d 672, 675 (11th Cir.
1993).

15. WHAT IS A MORTGAGE?
- Any written instrument
securing money or advances
(i.e. a Note).
- Installment Notes, Balloon
Notes, Revolving Credit
Agreements, Equitable
Mortgages

16. COVENANTS
- Payments
- Due on Sale Clause
- Occupancy
- Acceleration based on a government
taking
- Taxes
- Insurance
- Miscellaneous – e.g. mortgagor provide
service Dogs

17. Which Statute of Limitations applies to
Mortgages?
Trick Question: 2 statutes – statute of limitations
and statute of repose

18. Statute of Limitations
- Fla. Stat. § 95.11(2)(C) – within 5
years of accrual
- A procedural Statute that prevents the
enforcement of the cause of action
that has accrued. Houck Corp.

19. Statute of Limitations
- Prevents the enforcement of the
remedy rather than the termination of
the substantive rights of the parties.
Allie v. Ionata

20. Five years from What?
- Last Element occurs. Fla. Stat. § 95.11(2)(c)
- 4 elements of a foreclosure action
- (1) an agreement (2) a default (3)
acceleration of debt to maturity (4)
damages. Ernest v. Carter, 368 So.2d
428, 429 (Fla. 2d DCA 1979)

21. Five years from What?
- Majority Opinion - Central Home Trust Co. v.
Lippincott, 392 So.2d 931, 933 (Fla. 5th DCA
1980) – Acceleration starts the clock
- when some affirmative action is taken to
accelerate the debt such as “… making an oral
demand, and alleging acceleration in a pleading
filed in a suit on the debt.”

22. Five years from What?
- What if there is no acceleration clause?
- You cannot foreclose the mortgage. Reed
v. Lincoln 731 So.2d 104 (Fla. 5th DCA
1999)
BUT: you can sue for future damages
under the note. National Educ. Centers,
Inc. v. Kirkland, 635 So.2d 33 (Fla. 4th
DCA 1993).

23. Optional vs. Absolute Acceleration Clauses
- Optional – says acceleration does not occur
until plaintiff exercises the option. i.e.
Lippencott
- Absolute – Says that upon default future
payments are immediately accelerated.
Baader v. Walker, 153 So.2d 51 (Fla. 2d
DCA 1963).

24. Optional vs. Absolute Acceleration Clauses
- Can a presuit letter be the “acceleration”?
Held: not an acceleration because conduct
was to occur in the future.
Snow v. Wells Fargo Bank, N.A., 156 So.3d 538
(Fla. 3d DCA 2015) “If you do not pay the full
amount of the default, we shall accelerate the
entire sum of both principal and interest due and
payable....”. Mortgage contained an optional
acceleration clause.

25. Minority/Dicta Position – Date of Default
- Mostly Dicta and inaccurate restatement
of Florida Law
- CCM Pathfinder Palm Harbor Management, LLC v.
Unknown Heirs of Gendron, 40 Fla. L. Weekly D244
(Fla. 2d DCA 2015); Dorta v. Wilmington Trust Nat.
Ass’n, No. 5:13-cv-185-Oc-10PRL, 2014 WL
1152917 (M.D. Fla. March 24, 2014); Kaan v. Wells
Fargo Bank, N.A., 2013 WL 5944074 (S.D.Fla. Nov.
5, 2013)

26. Statute of Repose
- Fla. Stat. § 95.281
- a substantive statute which not only bars
enforcement of an accrued cause of action but
may also prevent the accrual of a cause of
action where the final element necessary for its
creation occurs beyond the time period
established by the statute. Houck Corp. v. New
River, Ltd, 900 So.2d 601 (Fla. 2d DCA 2005).

27. Statute of Repose
- Either 5 years after the date of maturity if
the maturity date is ascertainable from
the record . . . OR
- If the maturity date is not ascertainable -
20 years after the date of the [execution of
the] mortgage unless the note has a
definite maturity date, etc.

28. Ascertainable from the record
- Must be clearly visible on the face of the
recorded mortgage. CCM Pathfinder Palm
Harbor Management, LLC v. Unknown Heirs of
Gendron, 40 Fla. L. Weekly D244 (Fla. 2d DCA
2015).

29. Federal Preemption

30. Federal Preemption
- FDIC Assignee - enjoys a six year limitations period that
trumps both the Statute of limitations and the statute of
repose. 12 U.S.C. § 1821(d)(14)(A). WRH Mortg. Inc. v.
Butler, 684 So.2d 325 (Fla. 5th DCA 1996).
- Runs from the later of the accrual of the cause of
Action or the date the FDIC takes over as receiver

31. - SBA Administration Assignee – infinite time to
foreclose because there is no limitations period stated
in the Small Business Administration Act. See
Magnolia Federal Bank for Savings v. The United
States of America, (U.S.D.C. So. Dist. Miss. 1993).
See generally, United States v. Alvarado, 5 F.3d 1425
(11th Cir. Fla. 1993).
- Assignee of the USA acquires right to unlimited time
to foreclose. LPP Mtg Ltd. v. Tucker, 48 So.3d 115
(Fla. 3rd DCA 2010).
Federal Preemption

32. Federal Preemption
United States of America as Mortgagee – Same as
SBA Unlimited time to foreclose
- 28 U.S.C. § 2415(c) states “nothing herein shall be
deemed to limit the time for bringing an action to
establish the title to, or right of possession of real or
personal property”.

33. Tolling

34. Tolling
Death or incapacitation of the Mortgagee before the expiration
of the cause of action (Applies to both limitations and repose)
(if death) the action may be commenced within 12 months
from the date of the mortgagee’s death. Fla. Stat. §
733.104
(if incapacitation) within one year of appointment by the
guardian. Fla. Stat. § 744.394

35. Tolling
Future Advance Clause - If the mortgage contains a
future advance clause under Fla. Stat. § 697.04, then
future advances made under the mortgage can
extend the maturity date from five years to 20 years.
See Razak v. Marina Club of Tampa Homeowners
Assn., Inc., 968 So.2d 616 (Fla. 2d DCA 2007).
Typically seen in construction loans

36. Tolling
- Bankruptcy 11 U.S.C.A. § 108 applies to both
repose and limitations
- If the cause of action was not barred before the
filing then you have the later of
- The end of the original statute of limitations
OR
- 30 days after the notice of termination or
expiration of the automatic stay.

37. Tolling
Fla. Stat. § 95.051 (outline at p.6) limitations only
- Absence of defendant from state
- Use by Defendant of a false name
- Concealment by Defendant in state
- Payment of any part of the principle or interest of
any obligation or liability founded on instrument
- Incapacity or minority of plaintiff to sue and no
guardian exists

38. Tolling
- Equitable tolling – Prudent Plaintiff runs astray

39. Tolling
- Equitable tolling – Prudent Plaintiff runs astray
- Does not require active deception on the part of
the defendant but focuses on the plaintiff with a
reasonably prudent regard for his rights
- Examples:
- Mislead or lulled into inaction
- In some extraordinary way been prevented from
asserting rights
- Timely asserted rights in wrong forum

40. Tolling
Equitable Estoppel a.k.a. Wrongdoing by Defendant

41. Tolling
Equitable Estoppel a.k.a. Wrongdoing by Defendant
- Plaintiff must plead that Plaintiff knew it had a cause of
action but defendants wrong doing prevented plaintiff
from bringing a timely action
- Plaintiff and defendant know about the facts giving rise to
the suit but the wrongdoer prevails upon the other to
forego enforcing his right until the statutory time has
elapsed

42. Tolling
- Oral Promise to pay may also toll the statute of
limitations
- Oral promise to pay or make partial payment if
made prior to the statute of limitations tolls the
statute of limitations. Jacksonville Am. Pub. Co. v.
Jacksonville Paper Co., 197 So. 672, 676 (Fla.
1940)

43. Tolling
- Counterclaims for recoupment. See p.7 of outline

44. What happens when the statute of limitations runs?

45. What happens when the statute of limitations runs?
- Singleton v. Greymar Associates, 882 So.2d
1004, 1008 (Fla. 2004)
- Each new default is a breach which may be
separately accelerated (in the context of res
judicata)

46. What happens when the statute of limitations runs?
- U.S. Bank v. Bartram, 140 So.3d 1007 (5th
DCA 2014).
- Each new default represents a new cause of
action which may be an independent basis to
accelerate the loan again
- Currently pending in supreme court – oral
argument set for October 6, 2015.

47. What happens when the statute of limitations runs?
Third DCA - Deutsche Bank Trust Co. Amer. V.
Beauvais, 2014 WL 7156961 (Fla. 3d DCA
2014). Bartram only applies to a subsequent
action that follows a dismissal with prejudice.
Dismissals without prejudice including voluntary
dismissals do not reset statute of limitations.
Deceleration notice may reset the action for
SOL purposes, but unforeclosable lien remains
in force until the expiration of the repose.

48. What happens when the statute of limitations runs?
- Clear Split of authority see chart on P. 11 of
outline

49. FDCPA Liability Revisited
What do you do when you have a barred debt?
1. Is your debt barred? (see above)
2. Is your debt barred by SOL? If yes – 3 options
1. File a proof of claim and advise your client they
will end up at the Supreme Court
2. File a motion to determine the secured status of
your own claim and ask the court for an

50. FDCPA Liability Revisited
What do you do when you have a barred debt?
1. Is your debt barred by SOL? If yes – 2 options:
1. File a motion to determine the secured status of
your own claim and ask the court for an
extension to file your proof of claim.
2. File the proof of claim and see what happens -
If opposed, ask court to stay its ruling until
Bartram is decided.

51. FDCPA Liability Revisited
What do you do when you have a barred debt?
1. Is your debt barred by the Statute of Repose?
- Is your debt really barred by the Statute of
Repose? (see above)
- Tough luck – I like by bar license