Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5265203
Abstract:
When it comes to statutory limitations periods, Section 546(a) of the Bankruptcy Code (“Code”) at first exudes a bewitching simplicity, ascertainable without any need for more than a basic understanding of such terms as “preemption,” “statute of limitations,” and “statute of repose.” Employing somewhat plain prose, this subsection prescribes the deadline for any action under five substantive sections—§§ 544, 545, 547, 548, and 553 (collectively, “Avoidance Provisions” or “Avoidance Powers”)—by a trustee or debtor-in-possession as the earlier of: (1) two years “after the entry of the order for relief” or “1 year after” the appointment or election of a trustee if such appointment or election takes place “before” this two-year period’s expiration, whichever is later”; or (2) “the time the case is closed or dismissed.” As the Code necessarily preempts subordinate state law restrictions that would otherwise “impermissibly interfere with the federal purpose underlying the avoiding powers of a trustee ...,” this single subsection clearly overrides any period of time imposed by any state statute of limitation (“limitations period” or “prescriptive period”) bearing on such actions with a new federal window. Per this logic, as long as the relevant state-law claim exists on the date of the petition or order for relief (when the two diverge), a state statutes of limitations lacks “any continued effect” on the timeliness of any action under §§ 544, 545, 547, 548, and 553. Invoking this same ratiocination, bankruptcy and district courts have read § 546(a) to preempt related yet distinct bars—statutes of repose to state substantive causes of action prosecuted by a trustee per § 544 or § 545 or available as a defense to certain creditors under § 553—without undue focus on this prohibition’s quiddity. According to these jurists, assuming neither a statute of repose nor a statute of limitations (collectively, “limitations statutes” or “limitations provisions”) expired prepetition, § 546(a) nullifies either temporal constraint so as to allow the trustee “sufficient time to investigate for the existence of facts that would support actions under … [the] enumerated Code sections.” The statutory text, aptly perused, and preemption doctrine, correctly applied, support no other exegesis, a “general consensus” now maintains, though only few have probed the matter. In these opinions, the fact that § 547 and § 548, on the one hand, and §§ 544, 545, and 553, on the other, draw their substance from different headwaters matters not a whit. In four substantive parts, this article challenges the ramshackle foundations of this seemingly broad accord, as epitomized by the highest federal court—the U.S. Bankruptcy Appellate Panel of the Ninth Circuit in Rund v. Bank of America Corp. (In re EPD Inv. Co., LLC) (“Rund”)—to confront this oddly underexplored issue in a published opinion. Part II recounts the facts behind two cases in which the bankruptcy courts’ ultimate decisions severely impacted one or more stakeholders. Reviewing the relevant legal regimes, Part III précises the history and nature of non-bankruptcy law’s limitations provisions and the Avoidance Provisions and canvasses the precedent regarding the interplay between § 546(a) and statutory limitations periods, a motley neither as unambiguous nor as unanimous as many intone. Part IV starts with a summation of the interpretive tenets applicable to the Code and proceeds to demonstrate how the modern consensus has failed to fully account for the remarkably unremarkable prose, but the divergent impact, of § 546(a) and the essential character, but imprecision, of the manifold limitations provisions inscribed into state and federal tomes.
Commentary:
Most consumer attorneys reflexively treat statutes of repose the same as statutes of limitation when objecting to claims. But as Last Rites argues, repose is not merely a deadline—it’s a substantive limitation on the right itself, and it operates independent of accrual, discovery, or procedural events like bankruptcy.
That means:
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A claim that is still enforceable on the petition date might expire mid-Chapter 13 due to a state statute of repose.
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Conversely, a claim that expired under a statute of repose before the bankruptcy was filed may not be resurrected—even if the creditor files a timely proof of claim under Rule 3002(c).
And unlike statutes of limitation, repose periods are not generally subject to tolling under:
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§ 108 (because it refers only to statutes of limitation), or
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§ 502(b)(1), which evaluates the claim’s enforceability as of the petition date—not whether it remains enforceable years into the plan.
While North Carolina has no explicit statute of repose for enforcing debts (contract claims, credit card debt, etc.), N.C.G.S § 58-70-115(1), which has faced slight judicial interpretation, could arguably be a statute of repose as to a debt buyer as it bars from all collection activities, including filing suit or seeking arbitration, for stale debts. The affirmative denial of the right to act contrasts with a statute of limitations, which only provides an affirmative defense. Accordingly, this statute could be considered a statute of repose, meaning that during the course of a Chapter 13 case it could become uncollectible.
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