In re Varona

• Decision Date: 22 May 2008
• Docket Number: No. 07-71761-SCS.,07-71761-SCS.
• Citation: In re Varona, 388 B.R. 705 (Bankr. E.D. Va. 2008)
• Parties: In re Jamy Monte VARONA, Jr., Danielle Demetrius Varona, Debtors.
• Court: U.S. Bankruptcy Court — Eastern District of Virginia

388 B.R. 705

In re Jamy Monte VARONA, Jr., Danielle Demetrius Varona, Debtors.

No. 07-71761-SCS.

United States Bankruptcy Court, E.D. Virginia, Norfolk Division.

May 22, 2008.

COPYRIGHT MATERIAL OMITTED

Thomas B. Dickenson, Norfolk, VA, for Debtors.

Kenneth N. Whitehurst, III, Office of the U.S. Trustee, Norfolk, VA, for U.S. Trustee.

MEMORANDUM OPINION

STEPHEN C. ST. JOHN, Bankruptcy Judge.

This matter came on for hearing on April 22, 2008, upon the Objection to Claim Number 1, Objection to Claim Number 9, and the Motions for Sanctions (collectively, "the Claim Objections") filed by the debtors, Jamy Monte Varona, Jr., and Danielle Demetrius Varona (collectively, "the Varonas"), against Portfolio Recovery Associates, LLC ("Portfolio Recovery"). This matter also came on for hearing upon the Motion for Authority to Withdraw Claim Number 1 and Motion for Authority to Withdraw Claim Number 9 (collectively, "the Motions to Withdraw") by Portfolio Recovery and the Objection to the Withdrawal of Claim Number 1 and the Objection to the Withdrawal of Claim Number 9 (collectively, the "Objections to Withdrawal") filed by the Varonas. After consideration of the pleadings, the stipulated evidence, and the arguments of the parties, the Court took the matter under advisement. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157(b)(2) and 1334(b). Venue is proper pursuant to 28 U.S.C. § 1409(a). This Memorandum Opinion constitutes the Court's findings of fact and conclusions of law.

I. Findings of Fact

The Varonas filed their petition under Chapter 13 of the United States Bankruptcy Code in this Court on August 13, 2007. The Varonas filed a Chapter 13 Plan on August 21, 2007. Their Chapter 13 Plan was confirmed by an order entered on February 12, 2008.

Portfolio Recovery filed a proof of claim on August 16, 2007, in the amount of $97.81 ("Claim Number 1"). Claim Number 1 stated that the debt was incurred on January 5, 1999, with a last payment date of August 9, 1999, and a charge-off date of April 5, 2000. Portfolio Recovery purchased the account from Providian National Bank on March 24, 2004. Portfolio Recovery filed a second proof of claim on September 13, 2007, in the amount of $3,629.29 ("Claim Number 9"). Claim Number 9 stated that the debt was incurred on November 1, 1997, with a last payment date of May 16, 2000, and a charge-off date of March 4, 2001. Portfolio Recovery purchased this account from Sears National Bank on April 25, 2002. Both Claim Number 1 and Claim Number 9 were originally incurred by Mrs. Varona as credit card debt.

The Varonas objected to Claim Number 1 and Claim Number 9 on September 19, 2007. In support of their Claim Objections, the Varonas allege, among other things, the following:

4. A careful pre-petition review of the debtors' credit reports did not show any judgments against the debtors in favor of the current creditor or its assignor, nor did the credit reports show any listing whatsoever of this claim, by Portfolio Recovery Associates, LLC, by [the assignor] or by any other creditor name in the approximate same dollar amount.

5. The face of the proof of claim form as filed by Portfolio Recovery leaves item number 3 "If court judgment, date obtained" blank.

6. The applicable statute of limitations on collection actions in Virginia is, at most, five years and has not ever been tolled until the filing of the present bankruptcy case on August 13, 2007. Accordingly, the statute of limitation on this potential claim has long since run out and the claim is time barred and unenforceable.¹

7. The proof of claim filed herein was not filed in good faith and is fraudulent on it [sic] face.

Claim Objections, ¶¶ 4-7.

The Varonas prayed that their Claim Objections be sustained and moved for an award of attorney fees and the imposition of sanctions against Portfolio Recovery.² On September 27, 2007, Portfolio Recovery filed two Notices of Withdrawal of Claim, wherein it attempted to withdraw Claim Number 1 and Claim Number 9 (collectively, "Withdrawals"). On September 28, 2007, the Varonas objected to the attempted withdrawal of these claims.³ In response to the Claim Objections, Motions for Sanctions, and Objections to Withdrawal, Portfolio Recovery filed a request for authority to withdraw Claim Number 1 and Claim Number 9 ("Motions to Withdraw") on October 19, 2007, in which Portfolio Recovery asserted that there would be no prejudice to the Varonas, other creditors, or parties in interest if the Court permitted it to withdraw its claims.

In lieu of the presentation of evidence, the Varonas and Portfolio Recovery entered into a Stipulation of Facts for consideration by this Court. The Stipulation provides as follow:

1. The Debtors filed their Chapter 13 case on August 13, 2007.

2. The Debtors filed their Chapter 13 Plan on August 21, 2007 which was confirmed by order dated February 12, 2008.

3. Portfolio Recovery Associates, LLC filed its proof of claim (Claim number 1) on August 16, 2007 in the amount of $97.81, asserting a general unsecured— non-priority claim, noting on the proof of claim that the debt was incurred on January 5, 1999, with a last payment date of August 9, 1999, and a charge-off date of April 5, 2000. Portfolio Recovery purchased this account from Providian National Bank on March 24, 2004. A copy of the claim form and attachment as filed is attached as Exhibit A.

4. Portfolio Recovery Associates, LLC filed its proof of claim (Claim number 9) on September 13, 2007 in the amount of $3,629.29, asserting a general unsecured — non-priority claim, noting that the debt was incurred on November 1, 1997, with a last payment date of May 16, 2000, and a charge-off date of March 4, 2001. Portfolio Recovery purchased this account from Sears National Bank on April 25, 2002. A copy of the claim form and attachment as filed is attached as Exhibit "B" to the Stipulation.

5. The Debtors' credit reports did not show any judgments against the debtors in favor of Portfolio Recovery or its assignors, nor did the credit reports show any listing whatsoever of these claims, by Portfolio Recovery Associates, LC, by Sears National Bank, by Providian National Bank or by any other creditor name in the approximate same dollar amount.

6. The Debtors would testify that they were totally unaware of any potential claims by this creditor or its assignors.

7. Portfolio Recovery would present evidence that prepetition, it sent letters and placed numerous telephone calls to Danielle Varona about the claims.

8. The Debtors did not list the claims described in paragraphs 3 and 4 above.

9. The faces of the proof of claim forms as filed by Portfolio Recovery leaves item number 3 "If court judgment, date obtained" blank and the Debtors' credit reports also show that no judgments have been obtained against them.

10. On September 19, 2007, the Debtors filed their objections to claims 1 and 9. There had been no communications on behalf of the Debtors to Portfolio Recovery before the objections were filed.

11. On September 27, 2007, Portfolio Recovery filed with the Court documents attempting to withdraw claims 1 and 9.

12. The attempted withdrawal was signed by Dolores Garcia, Lead Bankruptcy Specialist, Portfolio Recovery Associates, L.L.C., P.P. Box 41067, Norfolk, VA 23541. No state bar number or telephone number was listed and there was no certificate of service.

13. Dolores Garcia is not an attorney.

14. Portfolio Recovery Associates LLC is a wholly owned subsidiary of Portfolio Recovery Associates, Inc., ["PRA"] which is a publicly traded corporation.

15. In the ordinary course of business, PRA files proofs of claim in bankruptcy cases across the country. It is not uncommon for PRA to file proofs of claim on accounts that would be beyond the applicable statute of limitations for filing a collection suit. If an objection is filed to such a claim and such objection properly asserts the affirmative defense of the statute of limitations, PRA is willing to withdraw its claim or to allow such objection to be sustained.

16. Fourteen claims have been filed in the Varona case including the following:

Claim #     Current Creditor        Original Creditor       Amount of claim
                1           Portfolio Recovery      Providian Nat Bank        $   97.81
                7           Asset Acceptance        JC Penney                 $  106.02
                9           Portfolio Recovery      Sears                     $3,629.29
                10          Roundup Funding         Household/Levitz          $4,294.12
                11          Roundup Funding         Amoco                     $  206.91
                12          LVNV/Resurgent Cap      Cap 1/Citibank            $3,060.08
                13          Fan Distributing, LLC   Chase                     $7,144.55
                

Joint Stipulation of Facts, filed March 20, 2008.

On January 15, 2008, this case was reassigned to' the undersigned Bankruptcy Judge by reason of the retirement of the incumbent judge to whom the matter was originally assigned.

II. Conclusions of Law

This matter arises at a time when bankruptcy courts are examining the integrity of the claims process in various contexts. See, e.g., Nosek v. Ameriquest Mortgage Co. (In re Nosek), 386 B.R. 374, 380-81 (Bankr.D.Mass.2008); In re Countrywide Home Loans, Inc., 384 B.R. 373, 394-95 (Bankr.W.D.Pa.2008) (describing pending proceedings by the Chapter 13 Trustee and the United States Trustee to examine loan histories and impose sanctions on a creditor). The Varonas argue that Claim Number 1 and Claim Number 9 are fraudulent and subject to sanction by this Court pursuant to 11 U.S.C. § 105.⁴ The Varonas allege that an attempt to collect a debt which is time-barred has been found to be a violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p, and while acknowledging that the FDCPA is not applicable to bankruptcy proceedings, the Court should find the reasoning from decisions under the FDCPA to be analogous and conclude that the...