I am assuming those of you reading this understand that to be paid in bankruptcy, a creditor or claimant must file a proof of claim in accordance with Bankruptcy Rule 3002(a). What we are discussing here is the failure to file your proof of claim by the Bar Date set by the court. The effect depends largely upon the chapter of the Bankruptcy Code under which the case is proceeding.
IMPORTANT: for a very long time, the date by which claims must be filed was 90 days from the date set for the initial Meeting of Creditors. Those deadlines were recently revised effective 12/01/17 by Amended Rule 3002(c)(7). Claims must now be filed not later than 70 days after the entry of the Order for Relief in a voluntary case. This period is 90 days for an involuntary Chapter 7 case. Governmental claims are due not later than 180 days after entry of the Order for Relief. For claims secured by a mortgage on debtor’s principal residence, the claim must be filed within 70 days of the entry of the Order for Relief, but supporting documentation can be filed thereafter but no later than 120 days from the entry of the Order for Relief.
ALSO IMPORTANT: in the Middle District of Alabama, the Notice of Filing expressly instructs creditors not to file claims unless notified to do so. Since 98% of my cases are no asset cases, what’s the point? Rule 3002(c)(5) addresses this point, and states that, if later in the case, the trustee acquires assets from which a dividend can be paid, the clerk is to give at least 90 days notice to creditors of the date by which claims must be filed.
CHAPTER 7
In Chapter 7, late filed claims are allowed, but are not considered for payment until timely filed claims are first paid, with interest. 11 U.S.C.§ 726(a).
If I am administering a Chapter 7 case, and it appears that after paying claims timely filed there will be a surplus, a second 90 day notice to file claims (we call it a “surplus notice”) goes out to creditors. Claims that are filed in compliance with a surplus notice are still paid only after claims timely filed in accordance with the original bar date have been paid.
If, after paying claims allowed either as timely, late filed, or filed pursuant to a surplus notice (effectively “late filed”) a surplus still remains, it is paid over the debtor after administrative costs.
For a discussion of late filed claims in Chapter 7, and the application of the “informal proof of claim doctrine,” please refer to Judge Sawyer’s opinion in In re Stephen L. Price, Chapter 7, 02-30767-WRS, Alabama Middle.
Let’s assume, however, there is no surplus, and your claim is late filed. It will be stricken, unless you convince the court that your claim falls within one of six pretty narrow exceptions set forth in Rule 3002(c) applicable to:
a governmental unit;
an infant or incompetent person or their representative;
an unsecured claim that arises in favor or an entity or becomes allowable as the result of a judgment;
a claim arising from the rejection of an executory contract or unexpired lease;
a notice of insufficient assets was given and then there are enough assets to make a distribution, and the clerk gives notice of the same; or
the notice was sent to a foreign address, and, upon motion, the court finds the notice was insufficient under the circumstances.
Barring the applicability of one of these exceptions, an objection to your claim will be sustained. I will file these objections, unless a creditor has already done so.
CHAPTER 13
A great deal depends upon the timely filing of claims in a Chapter 13 case, and the penalty for being tardy is accordingly quite severe.
A claim is timely in a Chapter 13 case when filed pursuant to Bankruptcy Rule 3002(c). A claim that is untimely must be disallowed pursuant to 11 U.S.C. § 502(b)(9).
As you can see, your claim is either timely filed, or not. If not, it must be disallowed.
The only “wiggle room” in a Chapter 13 case is the informal proof of claim, which I will discuss now and refer to elsewhere in this paper.
The Eleventh Circuit has held that an informal proof of claim may be allowed in bankruptcy. The case is Charter Co. v. Dioxin Claimants (In re Charter Co.), 876 F.2d 861 (11th Cir. 1989). Judge Sawyer has also written to this issue extensively, and I would refer you to his opinion in In re Jesse C. Laprade and Betty June Laprade, Chapter 13 Case Number 07-80001-WRS, Alabama Middle. The proof of claim in Laprade was one day late. The creditor argued that it should be allowed as an amendment to an informal proof of claim.
An informal proof of claim is simply a pleading filed in the case which contains information sufficient to allow it to be treated as an “informal” proof of claim. The Eleventh Circuit has held that the pleading must do two things: (1) it must apprise the court of the existence, nature and amount of the claim; AND, (2) it must make clear the claimant’s intent to hold the debtor liable for the obligation.
In Laprade the court found that the creditor had established the second element, but not the first. The claim was accordingly disallowed. It is significant to note the Judge Sawyer expressly rejected the argument that the first element was met because the claim was listed in the schedules. Being scheduled alone, unlike Chapter 11, is insufficient.
CHAPTER 11
Chapter 11 differs from Chapter 7 and 13 in two key respects.
First, in Chapter 11, if a claim is not scheduled as disputed, contingent or unliquidated, Bankruptcy Rule 3003(c) provides that a proof of claim need not be filed. The notice of commencement of the case that goes out to creditors will set this out on the reverse side.
Second, Bankruptcy Rule 9006(b)(1) empowers the court to allow late filed claims in Chapter 11 cases if the failure to timely file was the result of “excusable neglect.” The controlling authority is Pioneer Inv. Servcs. Co. v. Brunswick Assocs. Lte. P’Ship, 507 U.S. 380 (1993) in which the U. S. Supreme Court established the following criteria for a finding of excusable neglect:
1. The danger of prejudice to the debtor;
2. The length of delay, and its impact upon the processing of the case;
3. The reason for the delay, including the degree of control of the claimant;
4. Whether the moving party acted in good faith.
Judge Sawyer has likewise written to the issue of excusable neglect in Chapter 11 cases, and the Pioneer elements. The opinion is In re Robinson, Chapter 11 Case Number 06-30083-WRS, Alabama Middle.