§ 133.3     Unscheduled Creditors after BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 133.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

The deadline for timely filing proofs of claims in a Chapter 13 case for nongovernmental creditors is 90 days after the first date set for the meeting of creditors.1 For governmental units, a proof of claim is timely if filed not later than 180 days after the petition.2 After BAPCPA, there is also the possibility of a timely filed proof of claim by a governmental unit resulting from a tax return filed under § 1308 if the claim is filed within 60 days after the filing of the tax return.3

[2]

The courts have resisted enlarging the 90-day or 180-day deadlines for the timely filing of proofs of claim in Chapter 13 cases; reported decisions have admitted very few exceptions to these bar dates.4 Unscheduled creditors or creditors otherwise without notice or knowledge of the Chapter 13 case have rarely convinced a court to allow the late filing of a proof of claim.5 Unscheduled and badly scheduled creditors sometimes file tardy claims that are allowed because no party in interest objects.6 But the general rule stands: upon objection, a creditor that is not scheduled in a manner that permits the timely filing of a proof of claim is disabled to have an allowable claim in a Chapter 13 case.

[3]

Unscheduled creditors are not without remedies. On various theories, many courts have recognized that the debt of an unscheduled creditor is not dischargeable in a Chapter 13 case when the creditor had no opportunity to timely file a proof of claim and did not receive distributions under the confirmed plan.7

[4]

BAPCPA did not change the general rule that only timely filed claims are allowable and only allowable claims receive distributions under a Chapter 13 plan. There is still no statutory exception to the timely filing requirements for unscheduled or poorly scheduled creditors.8 But BAPCPA did change the rules for the discharge of unscheduled creditors in Chapter 13 cases and those changes will impact the management of unscheduled creditors in Chapter 13 practice.

[5]

BAPCPA amended § 1328(a) to add as an exception to discharge at the completion of payments in a Chapter 13 case debts of the kind specified in § 523(a)(3).9 Section 523(a)(3) excepts from discharge any debt “neither listed nor scheduled . . . in time to permit . . . timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing.”10 If the debt is a nondischargeable debt of the kind specified in § 523(a)(2), (4) or (6), then the debt is nondischargeable under § 523(a)(3) if it was neither listed nor scheduled in time to permit the timely filing of a proof of claim “and timely request for a determination of dischargeability”—again, with the exception that the creditor must not have notice or actual knowledge of the Chapter 13 case in time for such timely filing and request.11

[6]

There are challenges here with respect to unscheduled creditors in Chapter 13 cases. For ordinary creditors holding claims that are dischargeable under § 523(a)(2), (4) or (6), the incorporation of § 523(a)(3) into § 1328(a) means that the debt must be listed or scheduled or the creditor must have notice or actual knowledge of the case “in time for . . . timely filing” of a proof of claim. Timely filing of a proof of claim for most such creditors will be 90 days after the first date set for the meeting of creditors (180 days after the petition for governmental units) under § 502(b)(9) and Bankruptcy Rule 3002. The § 523(a)(3) case law—mostly developed in Chapter 7 asset cases—is not consistent with respect to how many days before the claims bar date is “in time” for the timely filing of a proof of claim for § 523(a)(3) purposes.12

[7]

The incorporation of § 523(a)(3) into § 1328(a) creates an imperative for debtors in Chapter 13 cases to quickly amend lists and schedules to add creditors when the failure to list or schedule is discovered. If the list or schedule of creditors is amended “in time” for the creditor to timely file a proof of claim, then the new exception to discharge in § 523(a)(3) is neutralized. Giving the unlisted and unscheduled creditor notice or actual knowledge of the Chapter 13 case “in time” for the timely filing of a proof of claim also takes § 523(a)(3) out of play. Because it cannot be accurately predicted how much time in advance of the claims bar date is enough time for § 523(a)(3) purposes, any delay in amending the list of creditors or schedules or in giving actual notice to the unscheduled creditor is an unnecessary risk.

[8]

Debtor’s counsel should also consider immediately filing a proof of claim on behalf of the unscheduled creditor under § 501(c) and Bankruptcy Rule 3004.13 Under Bankruptcy Rule 3004, the debtor can file a claim on behalf of a creditor that fails to file its own proof of claim until 30 days after expiration of the usual time for filing claims under Bankruptcy Rule 3002(c).14 Filing a proof of claim on behalf of the unscheduled creditor may provoke an objection to the claim and/or inspire the unscheduled creditor to file an amended claim.15 If the proof of claim filed on behalf of the creditor is timely filed, it will at least give the debtor an argument that the unscheduled creditor has an amendable, timely filed claim for § 523(a)(3) purposes.

[9]

When the debtor realizes there is an unscheduled creditor that has not had an opportunity to file a proof of claim, the usual first reaction is to amend the schedules to add the creditor. Notice of the Chapter 13 case must then be given to the added creditor, and BAPCPA amended § 342(c) to address this situation. At the end of § 342(c), BAPCPA dangled the following sentence:

If the notice concerns an amendment that adds a creditor to the schedules of assets and liabilities, the debtor shall include the full taxpayer identification number in the notice sent to that creditor, but the debtor shall include only the last 4 digits of the taxpayer identification number in the copy of the notice filed with the court.16
[10]

This new notice requirement signals in a Chapter 13 case notice of the addition of an unscheduled creditor is not “effective” if the notice did not include the complete taxpayer identification number of the debtor. Without effective notice, the creditor is positioned to argue that § 523(a)(3) applies and the debt is nondischargeable even if the creditor was added to the schedules “in time” for the timely filing of a proof of claim. There will be an interesting contest of statutory interpretations with respect to the nondischargeability of an unscheduled debt in § 523(a)(3)(A) when the schedules are amended “in time” for the timely filing of a proof of claim but notice of the amendment was not “effective” under § 342 as amended by BAPCPA.

[11]

When the unscheduled creditor holds a claim of the kind described in § 523(a)(2), (4) or (6), the timing issues change and debtors must act even more quickly to avoid nondischargeability under § 523(a)(3). If the debt is a so-called “fraud” claim, § 523(a)(3) requires that the debt be either listed or scheduled or the creditor must have notice or actual knowledge of the Chapter 13 case in time to both timely file a proof of claim and timely “request” a determination of dischargeability.

[12]

Prior to BAPCPA, § 523(a)(3) did not apply in Chapter 13 cases and there was no definition of “timely” for the filing of a complaint to determine dischargeability under § 523(a)(3) when the debt was the nondischargeable kind described in § 523(a)(2), (4) or (6). The rules drafters acted quickly after BAPCPA, and Interim Rule 4007(c) provides in a Chapter 13 case that a complaint to determine the dischargeability of a debt under § 523(c) must be filed “no later than 60 days after the first date set for the meeting of creditors under section 341(a).”17

[13]

Debts of the kind specified in § 523(a)(2), (4) and (6) are addressed in § 523(c), and thus the 60-day deadline after the first date set for the meeting of creditors is the deadline for the timely filing of a complaint to determine the dischargeability of a debt in a Chapter 13 case under § 523(a)(2), (4) or (6).18 Putting aside for the moment that § 523(a)(6) is not an exception to discharge at the completion of payments in a Chapter 13 case,19 after BAPCPA, § 523(a)(2) and (4) are exceptions to discharge at the completion of payments in a Chapter 13 case, and a complaint to determine the dischargeability of such a debt must be filed within 60 days of the first date set for the meeting of creditors.20

[14]

This means that listing, scheduling, giving notice or having actual knowledge “in time” for the timely filing of a request for the determination of nondischargeability under § 523(a)(2) or (4) in a Chapter 13 case is not the same as the 90 days after the first date set for the meeting of creditors (or 180 days after the petition for governmental units) within which an ordinary creditor can timely file a proof of claim. To avoid the possibility of nondischargeability under § 523(a)(3), the Chapter 13 debtor must list or schedule or give notice or actual knowledge to a “fraud” creditor more quickly. Giving notice after 60 days after the first date set for the meeting of creditors may be “in time” for the creditor to timely file a proof of claim, but it will not be “in time” for the timely filing of a request to determine the dischargeability of the debt under § 523(a)(2) or (4) and Interim Rule 4007(c).

[15]

Enabling credit card creditors to timely file proofs of claim and to timely request determination of the nondischargeability of debt is particularly implicated by this analysis. Most credit card nondischargeability litigation takes place under the fraud presumptions in § 523(a)(2) with respect to cash advances and luxury purchases. BAPCPA made § 523(a)(2) a new exception to discharge at the completion of payments in a Chapter 13 case.21 A credit card lender with a claim that may be nondischargeable under § 523(a)(2) must be listed or scheduled or have notice or actual knowledge of the Chapter 13 case “in time” to file a request to determine dischargeability—a deadline that will pass 60 days after the first date set for the meeting of creditors. That creditor must also be listed or scheduled or have notice or actual knowledge “in time” to timely file a proof of claim—a deadline that passes 90 days after the first date set for the meeting of creditors.

[16]

The wholesale incorporation of § 523(a)(3) into § 1328(a) adds imperative to the responsibility of Chapter 13 debtors to accurately schedule and give notice to creditors in time for the timely filing of proofs of claim. When the unscheduled debt may also be nondischargeable under § 523(a)(2), (4) or (6), this imperative is magnified and shortened in time. In Chapter 7 cases, these issues rarely arise under § 523(a)(3) because most Chapter 7 cases are no-asset cases in which there is no deadline for the timely filing of a proof of claim. But Chapter 13 cases are different. Almost every Chapter 13 case pays some dividend to unsecured creditors, and there is a deadline by which an unsecured claim holder must file a proof of claim to participate in distributions. Even an unscheduled creditor entitled by the confirmed plan to only a few pennies on the dollar has an argument for the nondischargeability of its entire debt under § 523(a)(3) when the creditor is not properly scheduled in time for the timely filing of a proof of claim in a Chapter 13 case.22 This new emphasis on careful scheduling and noticing of creditors is further complicated by new provisions for “effective notice” in § 342.23


 

1  See Fed. R. Bankr. P. 3002(c), discussed in § 282.1 [ General Rules: No Enlargement or Exceptions, Except . . . ] § 133.1  General Rules: No Enlargement or Exceptions, Except . . ..

 

2  11 U.S.C. § 502(b)(9) and Fed. R. Bankr. P. 3002(c), discussed in § 276.1 [ Governmental Units ] § 132.3  Governmental Units.

 

3  11 U.S.C. § 502(b)(9) and Interim Bankr. R. 3002(c)(1), discussed in § 508.1 [ New Timing Issues ] § 133.5  Tax Claim Exception after BAPCPA.

 

4  See § 282.1 [ General Rules: No Enlargement or Exceptions, Except . . . ] § 133.1  General Rules: No Enlargement or Exceptions, Except . . ..

 

5  See § 283.1 [ Unscheduled Creditors ] § 133.2  Unscheduled Creditors before BAPCPA.

 

6  See § 290.1 [ Untimely Filed Claims in Cases Filed after October 22, 1994 ] § 135.7  Untimely Filed Claims in Cases Filed after October 22, 1994.

 

7  See §§ 283.1 [ Unscheduled Creditors ] § 133.2  Unscheduled Creditors before BAPCPA and 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502.

 

8  But see 11 U.S.C. § 503(b)(1)(D), absolving some holders of administrative expenses for taxes of the prerequisite to file a timely request, discussed in § 508.1 [ New Timing Issues ] § 133.5  Tax Claim Exception after BAPCPA.

 

9  11 U.S.C. § 1328(a)(2), discussed in § 551.1 [ Unscheduled Creditors: § 523(a)(3) ] § 159.4  Unscheduled Creditors: § 523(a)(3).

 

10  11 U.S.C. § 523(a)(3)(A), discussed in § 551.1 [ Unscheduled Creditors: § 523(a)(3) ] § 159.4  Unscheduled Creditors: § 523(a)(3).

 

11  11 U.S.C. § 523(a)(3)(B), discussed in § 551.1 [ Unscheduled Creditors: § 523(a)(3) ] § 159.4  Unscheduled Creditors: § 523(a)(3).

 

12  See Manufacturers Hanover v. Dewalt (In re Dewalt), 961 F.2d 848, 851 (9th Cir. 1992) (30 days is “the minimum time within which it is reasonable to expect a creditor to act at the penalty of default.”); Sophir Co. v. Heiney (In re Heiney), 194 B.R. 898 (D. Colo. 1996) (18 days’ notice of filing not sufficient); Shaheen v. Penrose (In re Shaheen), 174 B.R. 424 (E.D. Va. 1994) (12 days’ notice not sufficient); Grossie v. Sam (In re Sam), 894 F.2d 778 (5th Cir. 1990) (Under § 523(a)(3)(B), 18 days’ notice is sufficient to require creditor to act to protect its interests.); Herman v. Bateman (In re Bateman), 254 B.R. 866 (Bankr. D. Md. 2000) (rejects 30-day minimum requirement of Dewalt) (citing cases).

 

13  See § 134.1  Timing, Form, Superseding and Amended Claims before 2005§ 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004 and § 134.3  Strategic Considerations: When to File Claims for Creditors.

 

14  See Fed. R. Bankr. P. 3004, discussed in § 134.1  Timing, Form, Superseding and Amended Claims before 2005. Note that Bankruptcy Rule 3004 was amended in 2005 to more accurately reflect that the debtor may file a proof of claim on behalf of a creditor only when the creditor has failed to file its own timely proof of claim. See § 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004.

 

15  See § 284.1 [ Amended Claims ] § 133.4  Amended Claims.

 

16  11 U.S.C. § 342(c), discussed in § 365.1 [ Section 342: Notice in Chapter 13 Cases after BAPCPA ] § 4.3  Section 342: Notice What Didn’t Happen.

 

17  Interim Bankr. R. 4007(c), discussed further in § 544.1 [ Time for Determining Dischargeability of Debt ] § 156.3  Time for Determining Dischargeability of Debt.

 

18  See § 544.1 [ Time for Determining Dischargeability of Debt ] § 156.3  Time for Determining Dischargeability of Debt for further discussion.

 

19  See 11 U.S.C. § 1328(a), discussed in § 554.1 [ Willful or Malicious Injury: § 1328(a)(4) ] § 159.7  Willful or Malicious Injury: § 1328(a)(4).

 

20  See Interim Bankr. R. 4007(c), discussed in § 544.1 [ Time for Determining Dischargeability of Debt ] § 156.3  Time for Determining Dischargeability of Debt.

 

21  See 11 U.S.C. § 1328(a), discussed in § 549.1 [ False Representations and Fraud: § 523(a)(2) ] § 159.2  False Representations and Fraud: § 523(a)(2).

 

22  See § 551.1 [ Unscheduled Creditors: § 523(a)(3) ] § 159.4  Unscheduled Creditors: § 523(a)(3) for further discussion of this issue.

 

23  See 11 U.S.C. § 342, discussed in § 365.1 [ Section 342: Notice in Chapter 13 Cases after BAPCPA ] § 4.3  Section 342: Notice What Didn’t Happen.