Cite as: Keith M. Lundin, Lundin On Chapter 13, § 135.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
Practices have grown up in some jurisdictions for the allowance of Chapter 13 claims in a manner that is different from other chapters of the Code. For example, in many jurisdictions soon after the deadlines for timely filing proofs of claim in Bankruptcy Rule 3002(c),1 the Chapter 13 trustee files a motion to allow claims. This motion may or may not be served on all creditors. Although no such motion is required by the Rules or the Code,2 the motion has the effect of giving notice to the debtor of which claim holders have filed proofs of claim and in what amounts. The debtor then has an opportunity to file objections to claims.3
In Chapter 13 cases filed before October 22, 1994, trustees typically filed the motion to allow claims soon after the 90-day period in former Bankruptcy Rule 3002. In Chapter 13 cases filed after October 22, 1994, trustees adjusted the timing of the motion to accommodate the 180-day definition of timeliness for proofs of claim by governmental units.4 Untimeliness is an important basis for objection to the allowance of claims.5
In a jurisdiction where no motion to allow claims or similar document is generated by the trustee, debtor’s counsel must review the claims register after the claims bar date to identify objectionable claims. Typically, the debtor’s help is needed to determine which claims are objectionable. Some debtors’ lawyers mail a copy of the claims register to the debtor with instructions that the debtor indicate any claims that are objectionable.
Absent a written objection from a party in interest, a claim is “deemed allowed” upon the filing of a proof of claim.6 Put another way, once a creditor files a proof of claim, the creditor’s work is done unless and until the debtor, the trustee or another creditor files a written objection.7
A proof of claim that is executed and filed in accordance with the Bankruptcy Rules constitutes “prima facie evidence of the validity and amount of the claim.”8 The prima facie evidentiary effect of a properly filed proof of claim applies to claims filed by creditors and to claims filed by the debtor or trustee on behalf of a creditor under Bankruptcy Rule 3004.9 It has been held that Bankruptcy Rule 3001(f) puts the burden on the objecting party to come forward with evidence—an objection without sufficient supporting evidence is overcome by the presumption in favor of validity.10 As explained by the Bankruptcy Appellate Panel for the Eighth Circuit, the purpose of Bankruptcy Rule 3001(f) “‘is to allow a creditor who attaches documents to his proof of claim to then refrain from presenting any other evidence because the documents establish sufficient evidence to sustain the claim.’”11
The presumption arises when a proof of claim is “executed and filed in accordance with these rules.”12 When the debt is based on a writing, “the documents must be filed with the proof of claim . . . . If a security interest in property of the debtor is claimed, the claim must be accompanied by evidence that the security interest has been perfected.”13 It has been held that the attachment requirement in Rule 3001(c) is not applicable to claims based on statutory obligations such as a federal income tax.14
The attachments necessary to give a proof of claim the prima facie effect described in Bankruptcy Rule 3001(f) will vary depending on the nature of the debt. For example, in Atwood v. Chase Manhattan Mortgage Co. (In re Atwood),15 the Bankruptcy Appellate Panel for the Ninth Circuit held that an oversecured mortgage holder can include attorney fees in its proof of claim in a Chapter 13 case but simply listing the amount of fees is not sufficient to raise the presumption in Bankruptcy Rule 3001(f). The BAP reasoned that the mortgage holder has the burden to prove the reasonableness of its fee claim and absent some evidence of reasonableness, the naked proof of claim was not sufficient: “In effect, the omission of the proof of claim to address an essential element of the substantive claim deprives Chase Manhattan of the favorable Rule 3001(f) evidentiary presumption regarding validity and amount. . . . [T]here is no evidence supporting the necessary finding of reasonableness.”16 Presumably, the mortgage holder in Atwood could have attached a billing itemization to support the amount stated on the proof of claim.
What happens when the attachments to a proof of claim are inconsistent with the proof of claim itself? Can a deficient proof of claim be “cured” by a banker’s box full of attachments? Bankruptcy Rule 3001(a) contemplates that the proof of claim itself must be “a written statement setting forth a creditor’s claim” and the proof of claim must “conform substantially” to Official Bankruptcy Form 10.17 The attachments are described in Bankruptcy Rule 3001(c) as the basis of the claim, not as the proof of claim itself. But Rule 3001(f) speaks of a proof of claim “executed and filed in accordance with these rules”—perhaps capturing the attachments as part of what determines whether a proof of claim is entitled to evidentiary effect.
In In re Avery,18 the Bankruptcy Court for the Eastern District of California faced a dilemma: a proof of claim that was deficient on its face with attachments that could fill in some of the deficiencies. In Avery, AIF filed a timely proof of claim that listed court and case information, but “AIF did not include on the face of the proof of claim any other information regarding its claim, such as its amount and whether it was a secured, priority, or general unsecured claim.”19 AIF did attach copies of a promissory note and financial disclosures. Not unreasonably, the trustee coded AIF’s claim in the amount of “$0.00.” The debtor completed payment in full of all allowed claims. After discharge, AIF woke up and moved to vacate the discharge order.20
The bankruptcy court acknowledged that AIF’s claim “was not a model of clarity or completeness” but held that AIF’s proof of claim “was adequate in form and content for purposes of Fed. R. Bankr. P. 3001(a) . . . . [T]he claim was presumptively valid and entitled to payment absent an objection by the trustee or the debtors.”21 In response to the rhetorical question, “what should the trustee pay when a proof of claim contains no demand for any particular amount?” the bankruptcy court directed attention to the attached note and disclosures:
From these copies, it was possible to determine that AIF’s claim was unsecured, that the loan was in the original amount of $15,000.00. . . . [I]f the attachments to AIF’s proof of claim did not inform the trustee of the amount and classification of the claim, the trustee should have objected to the proof of claim rather than unilaterally deeming it a demand for nothing.22
Chapter 13 trustees shudder at the implications of the bankruptcy court’s analysis in Avery. The “presumptively valid” proof of claim in Avery was valid for what amount? According to the bankruptcy court, it was valid for an unknown amount that the debtor or the trustee was obligated to divine from the attachments or by filing an objection. Are Chapter 13 trustees required to compare every proof of claim to its attachments to mathematically determine whether the amount stated (or not stated) on the proof of claim is accurate? How can it be said that a proof of claim that makes no “written statement setting forth a creditor’s claim” is “executed and filed in accordance with these rules”?
When the creditor makes a mistake—as the creditor in Avery undoubtedly did—the trustee is required to either abide by the mistake or file an objection. In Avery, the trustee chose to abide by the mistake and pay the proof of claim according to its demand. As the bankruptcy court pointed out in In re Taylor,23 when a mortgage holder mistakenly filed a proof of claim stating that the claim was “unsecured,” the proof of claim was prima facie evidence of validity and amount and the trustee appropriately paid the claim through the confirmed plan as an unsecured debt. In fact, the trustee would have been remiss to do otherwise.24 Was the trustee in Taylor obligated to object to the mortgage holder’s unsecured claim if the mortgage holder attached evidence that it had a security interest? This would be a logical deduction from Avery but not the procedure contemplated by the Code and Rules.
Bankruptcy Rule 3001(f) does not change the ultimate burden of proof—the debtor has the initial burden of establishing a colorable challenge to a properly filed proof of claim; but once the debtor has met that burden, the burden of going forward shifts back to the creditor, and the creditor bears the ultimate burden of persuasion.25 Put another way: “The presumption treating the proof of claim as prima facie evidence of validity and amount operates to create a mere rebuttable presumption. If rebutted, then the ultimate burden of proof is on the claimant.”26
In re Hodges27 illustrates how the burden of proof bounces back and forth in claims litigation in a Chapter 13 case. In Hodges, a mortgage holder filed an arrearage claim on Official Form 10. The proof of claim was signed by a representative of the mortgage holder, and copies of the promissory note and deed of trust were attached. The bankruptcy court found that the mortgage holder’s proof of claim “constitutes prima facie evidence of the validity and amount of [the mortgage holder’s] arrearage claim in this case.”28 The debtor objected to the arrearage claim and put on evidence that, in a prior Chapter 13 case, the trustee made payments to a predecessor of the mortgage holder, substantially reducing the arrearage. The bankruptcy court found this evidence “negated” the prima facie effect of the proof of claim and “the burden of going forward with the evidence shifted to [the mortgage holder] to prove the amount of its arrearage claim by a preponderance of the evidence.”29 At that point, the mortgage holder ran out of ammunition: “[The mortgage holder] produced no evidence in support of its arrearage claim other than the proof of claim.”30 The bankruptcy court sustained the debtor’s objection to the arrearage claim.
The Bankruptcy Appellate Panel for the Ninth Circuit explored the evidentiary presumption in Bankruptcy Rule 3001(f) at some length in Garner v. Shier (In re Garner).31 In Garner, a creditor named Shier filed two proofs of claim that were signed by an attorney. The proofs of claim had attachments including interrogatories and deposition excerpts from state court litigation with the debtor. The debtor filed an objection that was not accompanied by any evidentiary support. The BAP overruled the objection based on the presumption of validity in Bankruptcy Rule 3001(f) and explained the evidentiary effect of the presumption:
[The debtor] offered no evidence whatsoever, choosing instead to stand on a mere formal objection that the proofs of claim were not good enough. . . . [The debtor’s] mere formal objection, which placed in question the narrow issue of whether the proofs of claim were executed and filed in accordance with the rules, was not adequate to rebut the Rule 3001(f) evidentiary presumption that followed from the trial court’s affirmative answer to that question. . . . Basic claim objection procedure requires that an objection to claim be in writing and be filed. . . . An objection to claim is a “contested matter” governed by Federal Rule of Bankruptcy Procedure 9014. . . . Rule 9014 classifies the objection as a “motion” for purposes of Federal Rule of Civil Procedure 43(e). Evidence on motions may be taken by way of affidavit pursuant to Civil Rule 43(e). . . . The trial court required that evidence sufficient to rebut the Rule 3001(f) evidentiary presumption be filed in written form before the hearing. In doing so, it implemented a local rule regulating the timing and manner of presenting evidence in support of objections to claims. . . . [T]he Central District of California has prescribed by Local Bankruptcy Rule 3007-1(1) that objections to claims be supported by admissible evidence that is filed with the objection. This local rule invokes Civil Rule 43(e) with respect to objections to claims. . . . Civil Rule 43(e) . . . is within the “other rules” clause of Federal Rule of Evidence 802 and operates to create a hearsay exception for evidence on motions. . . . Thus, in bankruptcy contested matters, affidavit testimony that is based on personal knowledge of the witness is admissible hearsay on the authority of Federal Rule of Evidence 802 and Civil Rule 43(e).32
The use of affidavits in claims litigation described by the Bankruptcy Appellate Panel for the Ninth Circuit in Garner won’t work everywhere. In EvaBank v. Baxter,33 the bank filed a proof of claim for $6,326.34 and valued its collateral, a car, on the proof of claim at $6,326.34—coincidentally, the amount of its debt. The debtor filed a “motion to determine value,” which was treated as an objection to the bank’s claim. Consistent with local practice, the debtor’s motion stated that the value of the car was $5,170 and as evidence attached a “valuation affidavit.” The valuation affidavit, signed by the debtor, stated that the value of the car was $5,170 and further attached a “NADA Official Used Car Guide Automated Vehicle Valuation Sheet,” which set forth retail, trade-in and loan values for the car. The district court held that the debtor’s affidavit and attachments could not overcome the prima facie effect of the bank’s claim:
Debtor had to do more than just object. She had to present evidence of sufficient evidentiary weight to meet her burden of going forward thereby returning the burden of going forward to EvaBank. . . . The Valuation Affidavit . . . is fatally defective . . . . Among other things, it does not contain any basis on which one could ascertain the foundation of Debtor’s knowledge regarding the value of the Dodge. . . . A pro forma affidavit cannot be cross-examined. Trial by affidavit does not comport with “due process”. . . . [E]ven after Debtor objected to EvaBank’s secured claim by use of the Motion to Determine Value, what the Bankruptcy Court had in front of it was EvaBank’s deemed allowed claim constituting prima facie evidence of its secured status, versus an objection supported by no evidence. Given this state of evidentiary affairs, EvaBank was entitled to prevail on valuation without having to put on any additional evidence.34
The evidentiary effect of a creditor’s statement of the value of collateral on the face of a timely filed proof of claim is perhaps less certain than stated by the district court in Baxter.35 A properly executed and filed proof of claim is prima facie evidence of the “validity and amount” of the claim. To fill out Official Bankruptcy Form 10, secured and partially secured claim holders make representations about the value of collateral.36 If documented by the required attachments, Bankruptcy Rule 3001(f) could be interpreted to render those representations prima facie evidence of the validity and amount of the secured claim.37 This was certainly the conclusion reached by the district court in Baxter.
But the procedure for allowance of secured claims is confused somewhat by Bankruptcy Rule 3012. Without limitation as to time, Bankruptcy Rule 3012 provides, “The court may determine the value of a claim secured by a lien on property in which the estate has an interest on motion of any party in interest and after a hearing on notice to the holder of the secured claim and any other entity as the court may direct.”38 Under § 506(a) of the Code, the allowable amount of a secured claim is directly linked to the value of the collateral that secures the claim.39 A debtor can join issue with a secured creditor over the value of collateral, and thus the extent of an allowable secured claim, in several ways, including by motion under Bankruptcy Rule 3012 or by objection to the creditor’s claim under Bankruptcy Rule 3007.
But Bankruptcy Rule 3007 deals with the allowance of claims under § 502, not the value of collateral under § 506(a). And Rule 3007 provides that if an objection to a claim “is joined with a demand for relief of the kind specified in Rule 7001, it becomes an adversary proceeding.”40 Bankruptcy Rule 7001 states that a proceeding “to determine the validity, priority or extent of a lien or other interest in property” is an adversary proceeding.41 There is nothing in Bankruptcy Rule 3012 to suggest that a motion to value security triggers the adversary proceeding rules under Bankruptcy Rule 7001. Yet valuing collateral often is at the heart of determining the validity, priority or extent of a lien.
The questions then arise whether the prima facie evidentiary effect described in Bankruptcy Rule 3001(f) applies, and with what effect, when the creditor files a timely proof of claim asserting the value of its collateral and the debtor objects to the claim or moves for a valuation hearing under Bankruptcy Rule 3012. It has been held that Bankruptcy Rule 3001(f) deals with the allowance, validity and amount of a claim, not with the value of collateral; thus, a secured claim holder’s notation of value on its proof of claim is not entitled to any evidentiary presumption for purposes of § 506(a).42
Issue is joined on the effect of the filing of a proof of claim when the plan is inconsistent with a timely filed proof of claim. As discussed elsewhere,43 some courts have concluded that the binding, vesting and free and clear effects of confirmation under § 1327—even when the plan is quite specific with respect to the amount of a claim and the extent to which a claim is secured—are overcome by an inconsistent timely filed proof of claim. In some districts, the validity and extent of a secured claim stated on the face of a timely filed proof of claim prevail over inconsistent provisions of a confirmed plan unless and until the debtor also files and litigates a formal objection to the claim.44
These cases are troubling because they require Chapter 13 debtors to object to proofs of claim and to (re)litigate the amount of a claim or the extent of security notwithstanding that those same issues were noticed, tried and decided at a hearing on confirmation of the plan. If notice of the content of the plan and the opportunity to object were proper, the confirmation order should prevail over any contrary proof of claim.45 The creditor should be precluded to assert rights against the debtor through a proof of claim that are inconsistent with the provisions of the confirmed plan.
But there are too many reported decisions disrespecting confirmed plans in favor of inconsistent proofs of claim when the debtor has not also objected to the claim. Debtors are not safe to assume that a filed proof of claim will be trumped by confirmation. At least in the Fourth, Fifth and Eleventh Circuits,46 debtors are best advised to also file written objections to claims that are inconsistent with the confirmed plan.47 In these circuits, creditors that fail to object to adverse provisions of a plan before confirmation may achieve some leverage by timely filing proofs of claim that are inconsistent with the plan.
Divining the uncertain interaction between Bankruptcy Rules 3001(f), 3007, 3012 and 7001 should be avoided. If a secured claim holder has filed a proof of claim that values collateral, the debtor should join issue over the extent of collateral and the allowable amount of the secured claim by filing an objection to the claim under Bankruptcy Rule 3007. The objection may then become an adversary proceeding. Because so many courts are hung up on the formality of requiring full engagement of the claims allowance process, the objection-to-claim route through Bankruptcy Rule 3007 is the more sure procedure for testing the effect of the plan on an inconsistent proof of claim.48
Bankruptcy Rule 3007 controls objections to claims and provides that an objection to the allowance of a claim “shall be in writing and filed with the court.” It has been held that a trustee’s “motion for treatment of claim” is in reality an objection to a claim.49 Objections to claims are contested matters under Bankruptcy Rule 9014.50 Although a written response to a claim objection is not automatically required by Bankruptcy Rule 9014,51 by local rule or order a written response from the creditor is often required and the failure to timely respond can be fatal.52
Bankruptcy Rule 3007 governs objections to claims but does not specify the manner in which an objection to claim must be served. Because objections to claims typically start as contested matters governed by Bankruptcy Rule 9014, an objection “shall be served in the manner provided for service of a summons and complaint by Rule 7004.”53 Under Bankruptcy Rule 7004(b)(3), when the creditor is a corporation, service is usually accomplished by “mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process.”54
Other provisions of the Bankruptcy Rules can confuse service of an objection to a claim. Bankruptcy Rule 2002(g) provides that notices under Rule 2002 “shall be addressed as [a creditor] . . . has directed in its last request . . . . [A] proof of claim filed by a creditor . . . that designates a mailing address constitutes a filed request to mail notices to that address.”55 Bankruptcy Rule 2002(g) deals only with notices under Bankruptcy Rule 2002; but because court clerks and trustees are most involved in the noticing process, the mailing matrixes in Chapter 13 cases are typically maintained consistent with Rule 2002(g).
This is a problem for debtor’s counsel in claims litigation. The address off the matrix for notice purposes—even if designated on a proof of claim— may be completely different from the address appropriate for service of process under Bankruptcy Rule 7004.56 The cases demonstrate that the address supplied by a creditor on its proof of claim won’t necessarily work for service of an objection to that same claim.
In In re Boykin,57 the debtor objected to a claim filed by Marriott International, Inc., by mailing the objection to the address Marriott supplied on its filed proof of claim. The name and address on the proof of claim identified a “legal assistant specialist” working for Marriott. The bankruptcy court determined that service on the legal assistant specialist though consistent with the filed claim was not sufficient for purposes of Bankruptcy Rule 7004(b)(3):
[A] legal assistant specialist is not an officer, a general agent or another agent authorized by appointment or by law to receive process. . . . A legal assistant specialist in a bankruptcy department does not, without additional proof, rise to the level of a managing or general partner or [an] agent specifically appointed for purposes of service of process. A legal assistant specialist is a mere corporate employee. Service on a corporate employee is not sufficient.58
The lesson of Boykin and similar cases is this: when the creditor is a corporation, the objection to claim must be addressed “to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process.”59 The actual name of an officer or agent is not required, but the magic words describing that individual must appear on the envelope.
Even magic words are not enough if the creditor is an “insured depository institution.” As explained in Bankruptcy Rule 7004(h), service of an objection to claim on an insured depository institution must be “made by certified mail addressed to an officer of the institution unless—(1) the institution has appeared by its attorney . . . (2) the court orders otherwise . . . or (3) the institution has waived in writing its entitlement to service by certified mail.”60 Insured depository institutions are defined in 12 U.S.C. § 1813. To serve a bank or savings association with an objection to claim in a Chapter 13 case, the objecting party must use certified mail and must address the objection to an officer of the institution.
In re Tudor61 shows a creditor’s failed effort to use Bankruptcy Rule 7004(h) as insulation from an objection to its claim. The creditor in Tudor, Fleet Credit Card Services, L.P., was a credit card servicer. Fleet filed a proof of claim designating an address for notices: “Fleet Credit Card Services, L.P., P.O. Box 1016, Horsham, PA 19044.” The debtor objected to Fleet’s claim and served the objection by first-class mail at the quoted address, with an additional address line, “ATTN: Managing Agent.” Fleet did not respond to the objection and an order was entered disallowing Fleet’s claim. Several months later, Fleet moved to vacate the order disallowing its claim, asserting that the objection was not filed in compliance with Bankruptcy Rule 7004.
The bankruptcy court first held that mailing the objection to the address on Fleet’s proof of claim with the added attention line satisfied Bankruptcy Rule 7004(b)(3). The court cited the advisory committee notes to Bankruptcy Rule 7004(b)(3) for the proposition that service directed to the attention of an agent or officer identified by position or title rather than name was sufficient.
Fleet then raised Bankruptcy Rule 7004(h), claiming that it was a wholly owned subsidiary of an insured depository institution. Fleet lost this argument:
Insured depository institutions are to be served by certified mail addressed to an officer of the institution . . . . Nowhere does [12 U.S.C. § 1813(a) & (b)] include subsidiaries wholly owned or otherwise in its definition of insured depository institutions. . . . A creditor is therefore not entitled to be served under Rule 7004(h) by virtue of its being a subsidiary of an insured depository institution. Because Fleet Credit Card Services, L.P. the named party in this matter is not an insured bank or saving association service was proper under Bankruptcy Rule 7004(b)(3).62
It has been held that a Chapter 13 plan and the order of confirmation are not objections to claims of the sort contemplated by Bankruptcy Rule 3007.63 Other courts have recognized that the confirmed plan is the functional equivalent of an objection to claim when the plan contains provisions that are inconsistent with a filed proof of claim.64 The plan, or the summary of the plan, is in writing, is filed with the court and is mailed to all claim holders consistent with Bankruptcy Rule 3007. If notice of confirmation fully informs that the plan is inconsistent with the creditor’s proof of claim, the confirmation process satisfies all the requirements for an objection to claim under Bankruptcy Rule 3007. The hearing on confirmation will have all of the same procedural and substantive attributes as if the debtor had filed a separate, written objection to the creditor’s claim and joined two hearings. Because of the contrary case law, to be sure that confirmation will control the treatment of a filed claim that is inconsistent with the plan, debtors are best advised not to rely only upon the plan. Instead, if a proof of claim has been filed that is inconsistent with the plan, the debtor should file a written objection under Bankruptcy Rule 3007 and move the court to join the hearing on that objection with the hearing on confirmation of the plan.
If a proof of claim inconsistent with the plan is (timely) filed after confirmation, debtors have choices and the best practice is less clear. In the circuits that have reported decisions sustaining proofs of claim over inconsistent provisions in a confirmed plan,65 the debtor may need to file formal objections and litigate the inconsistencies (again).66 In other circuits, if notice of the plan was adequate, it is likely that the confirmed plan will trump the inconsistent, later-filed proof of claim, in any litigation subsequent to confirmation; but in that litigation, the debtor would assert the binding, vesting and free and clear effects of confirmation under § 1327 as preclusive of the inconsistent claim by the creditor. The debtor can wait for postconfirmation action by the creditor—a motion for stay relief, for example—then raise preclusion in response. If the claim involved is particularly important to the debtor’s fresh start, the debtor can always file an objection to the claim or an adversary proceeding for declaratory judgment that the confirmed plan binds the creditor and defeats the inconsistent proof of claim.
Bankruptcy Rule 3007 provides no time period within which the debtor or any other party in interest must file objections to claims. The sooner, the better is good advice because absent a written objection, the claim will be deemed allowed. The creditor may begin receiving payments through the plan if there is delay in filing an objection.
When a proof of claim is filed before confirmation, delaying objection until after confirmation creates the uncertain dynamic discussed above.67 Notwithstanding that there is no specific time limit for filing objections to claims in Bankruptcy Rule 3007, some courts have found that when a proof of claim is filed before confirmation, an objection to that proof of claim must also be filed before confirmation.68 Other reported decisions interpret the absence of a timeliness requirement in the Code or Rules as permission to file objections to claims anytime during a Chapter 13 case, subject only to equitable considerations.69
Reading a confirmation deadline into Bankruptcy Rule 3007 creates almost insurmountable problems for Chapter 13 practice.70 Especially in jurisdictions that reach confirmation before the claims bar date,71 debtors, trustees and creditors cannot know the allowable claims at confirmation and cannot satisfy a rule that requires objections to claims before confirmation of a plan. Even in a district that delays confirmation until after the claims bar date, reading a confirmation deadline into Bankruptcy Rule 3007 further delays confirmation until after the completion of all claims litigation. The resulting extended delay in the commencement of distributions under the plan would be an enormous, unnecessary new burden on creditors.
On somewhat odd facts, one court of appeals found a jurisdictional limitation on the adjudication of claims objections in Chapter 13 cases. In McAlpin v. Educational Credit Management Corp. (In re McAlpin),72 ECMC filed an untimely proof of claim for a student loan during the Chapter 13 case. The confirmed plan did not provide for payment of the student loan. The debtor completed payments to other creditors and received a discharge. After discharge, the debtor filed an objection to ECMC’s proof of claim, alleging only that the collection costs included pursuant to the formula in 34 C.F.R. § 674.45(e) were excessive. ECMC did not respond to the objection, and the bankruptcy court entered an order that ECMC could recover only the unpaid principal and interest portions of its claim. ECMC did not appeal that order but did persist in collection of its entire claim.
The debtor reopened the Chapter 13 case and filed an adversary proceeding to enjoin ECMC from recovering the barred collection costs. The bankruptcy court held that its prior order was preclusive and ECMC was enjoined from recovering the collection costs. Without reaching the merits of this conclusion, the Bankruptcy Appellate Panel for the Eighth Circuit held that the bankruptcy court was without jurisdiction to entertain the original claim objection filed by the debtor after discharge in the Chapter 13 case:
The [McAlpin v. Educational Credit Management Corp. (In re McAlpin), 254 B.R. 449 (Bankr. D. Minn. 2000),] bankruptcy court did not have jurisdiction pursuant to 28 U.S.C. § 1334 to enter the order determining the amount of the allowed claim. . . . The objection to claim was filed after the five-year period had elapsed, and after completion of a plan paying nothing to ECMC. Therefore although the outcome of the Objection to Claim Proceeding may have affected Mr. McAlpin’s liabilities regarding the collection costs, it did not impact upon the handling or administration of his bankruptcy case. . . . Since the [claim objection] order could not conceivably have affected the estate, or met the [Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984),] test, this Court believes that the underpinnings of the order for injunctive relief cannot stand.73
On slightly different reasoning, the Eighth Circuit affirmed the BAP’s jurisdictional holding:
We agree that the bankruptcy court did not have jurisdiction in the claim objection proceeding under 28 U.S.C. §§ 157(b) or (c) . . . because (1) Mr. McAlpin’s challenge to the propriety of the claimed collection costs came after his discharge, so the claim could no longer have been against the estate, and thus did not involve a right created by bankruptcy law or arising only in bankruptcy . . . and (2) the claim objection proceeding was not related to the bankruptcy, because at the time Mr. McAlpin objected to the claim there was no longer a plan to be confirmed, or an estate, and therefore the proceeding could not conceivably have affected the estate.74
Although it was certainly odd that the debtors in McAlpin filed the claim objection after discharge, there is much to question about the Eighth Circuit’s conclusion that the bankruptcy court was without jurisdiction to adjudicate the debtor-creditor relationship between the McAlpins and ECMC.75 The Eighth Circuit cites no provision of the Code for the proposition that the Chapter 13 estate ceased to exist at discharge. The student loans claimed by ECMC were nondischargeable in the Chapter 13 case,76 and determining the amount that ECMC could collect was at least related to if not a fundamental aspect of the discharge the debtors received in the Chapter 13 case. McAlpin signals that Chapter 13 debtors should initiate all claims litigation before the completion of payments under the plan.
Even after a claim has been allowed or disallowed under § 502(b) and Bankruptcy Rule 3007, the Code and Rules contemplate reconsideration for cause, again without time limitation. 11 U.S.C. § 502(j) provides: “A claim that has been allowed or disallowed may be reconsidered for cause . . . according to the equities of the case.”77 The reported decisions paint a less than clear picture of when and under what circumstances § 502(j) may be used by a Chapter 13 debtor, especially after confirmation of a plan.
For example, it has been said that after confirmation and absent a provision of the plan to the contrary, § 502(j) is the only way for a Chapter 13 debtor to attack the validity of a proof of claim.78 Less severely, § 502(j) has been cited as an available platform for objection to an allowed claim that is inconsistent with a confirmed plan.79 An objection to a proof of claim 26 months after confirmation was beyond the limits of reconsideration under § 502(j).80 Other reported decisions allow Chapter 13 debtors to use § 502(j) to reconsider the allowance of claims when collateral is lost, destroyed or repossessed after confirmation.81
As mentioned above, Chapter 13 trustees in some districts file a written motion to allow claims soon after the timeliness deadlines in Bankruptcy Rule 3002(c) to provoke some closure. To challenge an order allowing and disallowing claims, it has been held that a creditor must do something more than just file a proof of claim or an amendment to a proof of claim—the creditor must also file a motion to reconsider claims under Bankruptcy Rule 3008.82
Creditors have standing to object to claims filed by other creditors. Although it is rare for creditors to review the claims register and file objections, there are often good financial reasons for allowed claim holders to police the filing of claims by other creditors. For example, when the plan pays less than 100 percent of allowed unsecured claims, if a creditor successfully objects to an unsecured proof of claim, the percentage of payment of allowed claims should increase. This will almost always be true in jurisdictions that use “base” plans.83
With respect to unsecured proofs of claim, creditors often have incentives to object when the debtor does not. When the debtor’s obligation under the plan is to pay a specified base amount without regard to the ultimate allowance of unsecured claims, the debtor has little incentive to object to the allowance of any particular unsecured claim.84 In contrast, as among the unsecured claim holders, the allowance of every next claim reduces the share of each creditor. The holders of allowed unsecured claims are benefited by successful objection to other unsecured claims in any base plan that pays less than 100 percent.
There are other claims that the Chapter 13 debtor might elect not to oppose that creditors would be advantaged to challenge. For example, to avoid relief from the codebtor stay, a Chapter 13 debtor wants to pay the holder of a co-signed claim in full with postpetition interest.85 The debtor might not object to an untimely claim filed by the creditor with a cosigner the debtor wants to protect. Other creditors would usually be better off to defeat distributions to the co-signed claim. Unmatured interest on an unsecured claim is not allowable under § 502(b)(2).86 The holder of an ordinary unsecured claim might enhance its recovery by objecting to any proof of claim that includes postpetition interest filed by the holder of a codebtor claim.87
Similar logic applies to student loans and support claims that are nondischargeable in Chapter 13 cases.88 Most student loan contracts call for interest that continues to accumulate during the Chapter 13 case. By state law, many domestic support obligations accrue interest until paid. Chapter 13 debtors want to pay these debts and the accumulating interest through the plan to avoid being stuck with a large nondischargeable claim at the completion of payments to other creditors. Chapter 13 debtors are not likely to object to claims from student loan agencies or former spouses that include unmatured or postpetition interest. Unmatured, postpetition interest on a student loan is not an allowable claim.89 A nondischargeable claim for alimony, maintenance or support accrues postpetition interest that is also nondischargeable, but the unmatured interest is not an allowable claim.90 Creditors with allowed claims (or the trustee) can object to the allowance of unmatured interest as part of a student loan or support claim.
In a jurisdiction where the Chapter 13 trustee distributes a motion to allow claims, creditors can participate in the claims allowance process with somewhat greater ease. However, even with a claims register in hand, few creditors have sufficient information to know of grounds for objection—other than the obvious objection that a claim is untimely.91 As the computerization of Chapter 13 trustees’ offices progresses, it may become possible for creditors to routinely and inexpensively access the trustee’s database. When creditors can pull up the claims registers in Chapter 13 cases on a personal computer at the creditor’s office, monitoring of claims in Chapter 13 cases by the credit community will become a reality.
Debtors sometimes join a request for attorneys’ fees or sanctions with an objection to a proof of claim. In In re Gifford,92 the bankruptcy court awarded the debtor fees for partially prevailing in an objection to a mortgage holder’s proof of claim based on a Connecticut statute that makes reciprocal any provision for recovery of attorneys’ fees in a consumer contract or lease. In In re Sammon,93 the bankruptcy court held that it was not appropriate for the debtor to join a Bankruptcy Rule 9011 request for sanctions with an objection to a claim. Citing the 1997 amendments to Bankruptcy Rule 9011, the bankruptcy court explained that it was “procedurally improper to include a request for Fed. R. Bankr. P. 9011 sanctions with an objection to proof of claim” because the request for sanctions was an additional prayer for relief contained in another motion (the objection to claim) and the debtor did not serve the objection and request for sanctions 21 days before filing. In contrast, in In re Dansereau,94 the bankruptcy court cited Bankruptcy Rule 9011 as one basis for an order reducing to one dollar priority claims filed by Cash In Advance “without apparent factual or legal basis”; Cash In Advance was also enjoined from filing priority claims in the future. In Timmons v. Cassell (In re Cassell),95 the Bankruptcy Appellate Panel for the Sixth Circuit held that it was inappropriate to sanction a creditor for filing a partially disallowed claim when there was a reasonable basis for the claim and the creditor made a reasonable inquiry under the circumstances.
Adversary proceedings and class actions are sometimes used by debtors and Chapter 13 trustees to supplement objections to the claims of creditors alleged to be engaged in questionable claims-filing practices. For example, in Slick v. Norwest Mortgage, Inc. (In re Slick),96 Chapter 13 debtors alleged that Norwest Mortgage, Inc., failed to disclose attorney fees buried in its proofs of claim filed over many years in thousands of Chapter 13 cases. After trial, the bankruptcy court held that Norwest’s undisclosed attorney fees were disallowed, and Norwest was sanctioned with $2 million in punitive damages plus attorney fees.97 In Kerney v. Capital One Financial Corp. (In re Sims),98 Chapter 13 debtors and the standing trustee alleged that Capital One Financial Corporation systematically overstated proofs of claim in Chapter 13 cases. The bankruptcy court found that the plaintiffs stated causes of action and held that the debtors and trustee had standing based in part on their standing to object to proofs of claim filed by Capital One Financial. Similarly, in 1st Franklin Financial Corp. v. Barkley (In re Anthony),99 the bankruptcy court cited reconsideration of claims under § 502(j) as one basis for an adversary proceeding by debtors and the Chapter 13 trustee alleging that 1st Franklin Financial Corporation schemed to defraud Chapter 13 debtors by charging inflated credit life and credit disability insurance premiums. The bankruptcy court reasoned in Anthony that if the allegations were substantiated, “1st Franklin would be culpable for filing fraudulent claims in this court. As such, these claims can be reconsidered pursuant to § 502(j).”100
1 See §§ 275.1 [ 1994 Code Amendments Changed the Rules ] § 132.1 1994 Code Amendments Changed the Rules–280.1 [ Secured Claim Holders ] § 132.7 Secured Claim Holders, 289.1 [ Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon ] § 135.6 Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon and 290.1 [ Untimely Filed Claims in Cases Filed after October 22, 1994 ] § 135.7 Untimely Filed Claims in Cases Filed after October 22, 1994.
2 11 U.S.C. § 1302(b)(1) mandates that the trustee shall perform the duty specified in § 704(5): “If a purpose would be served, examine proofs of claim and object to the allowance of any claim that is improper.” 11 U.S.C. § 704(5). It might be said that a Chapter 13 trustee’s motion to allow claims is in satisfaction of this duty. See § 62.1 [ Review Claims, Object to Claims and File Proofs of Claim ] § 53.15 Review Claims, Object to Claims and File Proofs of Claim. It is hard to fault Chapter 13 trustees for filing such motions. The trustee does not want to make payments to creditors with claims that are objectionable, but the trustee will rarely have the information necessary to determine whether a claim is objectionable. A motion to allow claims gives the trustee some protection and some closure on the issue whether it is proper to make distributions to the creditors that have filed proofs of claim. Section 502(j) of the Code and Bankruptcy Rule 3008 permit a motion for reconsideration of an order allowing or disallowing a claim, without time limitation. See below in this section.
3 The Chapter 13 debtor has standing to review and object to proofs of claim. See § 56.2 [ Review Claims, Object to Claims and File Proofs of Claim ] § 51.5 Review Claims, Object to Claims and File Proofs of Claim. See, e.g., Hardgrave v. La Rock (In re Hardgrave), Case No. 94-4832, 1995 WL 371462 (4th Cir. June 21, 1995) (Table decision at 59 F.3d 166) (In a footnote, Chapter 13 debtor has standing to object to “untimely” or “informal” claim of an unsecured creditor where allowance of the claim would affect plan payments required of the debtor.); Kerney v. Capital One Fin. Corp. (In re Sims), 278 B.R. 457, 484 (Bankr. E.D. Tenn. 2002) (“[T]he chapter 13 debtor is a party in interest with standing under § 502(a) to object to claims.”). But see Holmes v. Silver Wings Aviation, Inc., 881 F.2d 939 (10th Cir. 1989) (Chapter 13 debtor lacks standing to object to administrative status for a creditor that objected to confirmation and forced the debtor to increase payments to creditors. The debtor’s payments into the plan will not change; only the allocation among creditors will be affected by administrative status. Thus, the debtor is not an aggrieved party.).
4 See 11 U.S.C. § 502(b)(9) and Fed. R. Bankr. P. 3002(c) (as amended Dec. 1, 1996).
5 See §§ 289.1 [ Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon ] § 135.6 Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon and 290.1 [ Untimely Filed Claims in Cases Filed after October 22, 1994 ] § 135.7 Untimely Filed Claims in Cases Filed after October 22, 1994.
6 11 U.S.C. § 502(a).
7 See, e.g., Universal Am. Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. 2003) (Because mortgage arrearage claim filed before confirmation was “deemed allowed,” confirmation of an inconsistent plan does not constitute an objection to the claim and does not limit the mortgage arrearage claim or lien.); Garner v. Shier (In re Garner), 246 B.R. 617, 620 (B.A.P. 9th Cir. 2000) (“[A] claim, proof of which is filed under § 501, is deemed allowed unless a party in interest objects.”); In re Jensen, 232 B.R. 118, 119–20 (Bankr. N.D. Ind. 1999) (“While lateness is now a recognized reason for denying a claim, the importance of saying this in § 502(b), rather than someplace else, is that timeliness is no longer a prerequisite for allowing a creditor’s claim. As the process now works, a creditor files its claim, ala § 501; then, through § 502(a), that claim is deemed allowed, unless it is objected to. Thus, even late claims are deemed allowed unless objected to. If an objection is filed, lateness is a reason not to allow the claim. . . . [T]he statute has shifted the responsibility for raising the issue from the tardy creditor to other parties. Timeliness . . . has become an affirmative defense . . . . [O]ld habits die hard and creditors continue to file motions to allow late claims. . . . Late or not, Premium Lease’s claim, like all other filed claims, stands as allowed, unless and until a party in interest objects.”). But see In re Coates, 292 B.R. 894 (Bankr. C.D. Ill. 2003) (Creditor’s reliance on the “deemed allowed” provision of § 502(a) was “gamesmanship” when counsel for the creditor filed an amended proof of claim 20 minutes prior to a scheduled evidentiary hearing on an objection to the creditor’s claim.).
8 Fed. R. Bankr. P. 3001(f).
9 See Tepper v. Burnham (In re Tepper), 279 B.R. 859, 864 (Bankr. M.D. Fla. 2002) (Proofs of claim filed by the debtor on behalf of a taxing authority four years after the petition to which no objection or superseding claim is filed are “allowed and are presumptively valid in the amount and characterization of Defendant’s claims.”).
10 In re Fitak, 92 B.R. 243 (Bankr. S.D. Ohio 1988). Accord McDaniel v. Riverside County Dep’t of Child Support Servs. (In re McDaniel), 264 B.R. 531, 533 (B.A.P. 8th Cir. 2001) (Debtor failed to overcome the presumptive validity of (untimely) proof of claim filed by Department of Child Support Services in an amount in excess of the (timely) proof of claim filed by the debtor on behalf of the child support creditor. “[T]he objecting party bears the burden of producing sufficient evidence to rebut the presumptive validity of a proof of claim. . . . Because [the debtor] failed to produce substantial evidence to rebut the presumptive validity of RCDCSS’s proof of claim, we affirm the bankruptcy court’s order overruling [the debtor’s] objection.”); In re Waterman, 248 B.R. 567, 571 (B.A.P. 8th Cir. 2000) (Debtor failed to produce evidence to rebut presumption of validity of proof of claim. “[The creditor] filed a proper Proof of Claim and attached the supporting documentation . . . . [T]he Proof of Claim was prima facie evidence of the validity and amount of her claim. . . . Debtor was required to provide substantive evidence rebutting the claim. . . . Debtor did not produce any evidence to rebut the claim.”); Garner v. Shier (In re Garner), 246 B.R. 617 (B.A.P. 9th Cir. 2000) (Objection to claim unaccompanied by any affidavit or other evidence fails to overcome presumption of validity and amount in Bankruptcy Rule 3001(f).); EvaBank v. Baxter, 278 B.R. 867 (N.D. Ala. 2002) (Prima facie evidentiary effect of value of car on proof of claim is not overcome by affidavit of value from debtor that only copied NADA wholesale and retail values.), vacating In re Baxter, 269 B.R. 458 (Bankr. N.D. Ala. 2001); In re Booker, 301 B.R. 207 (Bankr. N.D. Ohio 2003) (Debtor failed to overcome prima facie validity of IRS proof of claim with respect to income taxes for years in which the debtor did not file returns; debtor failed to prove that income for foster care services was “qualified foster care payments” under § 131(b) of the Internal Revenue Code.); In re Schlehr, 290 B.R. 387 (Bankr. D. Mont. 2003) (Trustee failed to overcome prima facie validity of student loan claims that included collection cost percentage required by 20 U.S.C. § 1091a(b)(1) and 34 C.F.R. § 30.60; ECMC was not required to file Bankruptcy Rule 2016 disclosure because statutory collection costs did not include any professional fees or costs.); In re Scola, No. 01-50533-L2-13, 2002 WL 31770473 (Bankr. S.D. Tex. June 29, 2002) (unpublished) (Debtor who has failed to file required tax returns cannot overcome prima facie validity of the IRS’s proof of claim.); In re DiDaniele, No. 01-55091 (MS), 2002 WL 535320 (Bankr. D.N.J. Feb. 28, 2002) (unpublished) (Testimony that unnamed IRS employee said debtor did not owe any taxes does not overcome prima facie evidentiary effect of the IRS’s proof of claim.); In re James, No. 97-14092, 2002 WL 1405936, at *1–*2 (Bankr. S.D. Ala. Feb. 1, 2002) (unpublished) (Debtor failed to prove innocent spouse defense to tax claim filed by the State of Alabama. “[T]he proof of claim is prima facie evidence of the validity and amount of the claim. . . . The only evidence offered . . . was Ms. James’ statement that the income reported on the federal return was that of her husband. That evidence alone does not allow the Court to conclude that Ms. James was entitled to relief.”); In re Bean, 252 B.R. 570 (Bankr. M.D. Fla. 2000) (Debtor failed to overcome prima facie validity of proofs of claim filed by wholesaler of cars; debtor is personally liable for cars delivered to dealership and sold out of trust.); In re McMillan, 251 B.R. 484, 489–90 (Bankr. E.D. Mich. 2000) (“Debtor did not file an objection to HFC’s proof of claim, the claim is ‘deemed allowed’ under § 502(a). . . . Since HFC’s proof of claim concededly complies procedurally with the applicable Bankruptcy Rules, the proof of claim is ‘prima facie evidence of the validity and amount of the claim.’ F.R.Bankr.P. 3001(f).”); McCalla v. Nationsbanc Mortgage Corp. (In re McCalla), 238 B.R. 94, 95 (Bankr. M.D. Pa. 1999) (On debtors’ objection to mortgage holder’s proof of claim, debtors failed to prove that escrow shortage was incorrect. “A proof of claim is prima facie evidence of the validity and amount of a claim. . . . [I]t is the burden of the objector to come forward with evidence sufficient to rebut the presumption of validity. . . . The Debtors’ evidence on this issue has come up short . . . they have not successfully rebutted that portion of the claim evidencing the escrow shortage.”).
11 In re Waterman, 248 B.R. at 570.
12 Fed. R. Bankr. P. 3001(f).
13 248 B.R. at 570. Accord Garner v. Shier (In re Garner), 246 B.R. 617 (B.A.P. 9th Cir. 2000).
14 See, e.g., In re Shaver, 247 B.R. 436, 439–40 (Bankr. E.D. Tenn. 1999) (Applying Spiers v. Ohio Department of Natural Resources (In re Jenny Lynn Mining Co.), 780 F.2d 585 (6th Cir. 1986), “Fed. R. Bankr. P. 3001(c) is inapplicable to claims that are based on a statutory obligation such as federal income tax, as opposed to claims that are based on a writing.” Bankruptcy court rejects debtor’s objection to IRS’s proof of claim on the ground that the Service failed to attach any documentation to support the claim.). See also In re Scola, No. 01-50533-L2-13, 2002 WL 31770473 (Bankr. S.D. Tex. June 29, 2002) (unpublished) (Debtor who has failed to file required tax returns cannot overcome prima facie validity of the IRS’s proof of claim.).
15 293 B.R. 227 (B.A.P. 9th Cir. 2003).
16 293 B.R. at 233. Accord In re Coates, 292 B.R. 894, 902 n.10, 903–04 (Bankr. C.D. Ill. 2003) (Presumption in Bankruptcy Rule 3001(f) does not extend to the reasonableness of fees and expenses in mortgage arrearage claim. “LITTON LOAN’S attorney did not articulate what he thought the effect was of filing an amended proof of claim twenty (20) minutes prior to a scheduled evidentiary hearing. Because he failed to introduce any evidence at the hearing, the Court can only assume that the attorney thought that the amended claim would somehow relieve him of the need to present evidence. If so, he was mistaken.” In a footnote, “[t]his Court is of the view that LITTON LOAN’S reliance on the ‘deemed allowed’ provision amounts to gamesmanship and is nothing more than an effort to avoid a just, speedy and inexpensive resolution of the real issue, which is, as in most cases, the reasonableness of its attorney fees and expenses.”).
17 Fed. R. Bankr. P. 3001(a).
18 272 B.R. 718 (Bankr. E.D. Cal. 2002).
19 272 B.R. at 723.
20 See § 356.1 [ Revocation of Discharge and Relief from Discharge Order ] § 161.2 Revocation of Discharge and Relief from Discharge Order for discussion of relief from a discharge order.
21 272 B.R. at 724.
22 272 B.R. at 723–24.
23 280 B.R. 711 (Bankr. S.D. Ala. 2001).
24 See, e.g., In re Jones, 271 B.R. 397, 401 (Bankr. S.D. Ala. 2000) (Based on presumptive validity of filed proof of claim, it was not appropriate for Chapter 13 trustee to bifurcate undersecured claim according to the confirmation order when creditor filed claim after confirmation that was inconsistent with confirmed plan. “[T]he trustee needs to pay a creditor’s claim as filed unless the debtor objects to the claim.”).
25 In re Ousley, 92 B.R. 278 (Bankr. S.D. Ohio 1988). Accord In re Waterman, 248 B.R. 567, 571 (B.A.P. 8th Cir. 2000) (“‘The presumption of the validity of the proof of claim is a procedural device that places the burden of producing evidence to rebut the presumption on the debtors.’”); In re Carrazco, No. 02-52925, 2003 WL 22231720 (Bankr. M.D.N.C. Sept. 26, 2003) (unpublished) (Contractor’s proof of claim was entitled to prima facie evidentiary presumption in Bankruptcy Rule 3001(f); debtor overcame prima facie effect and contractor then carried burden of proof with respect to part of its breach of contract claim.); In re Hodges, No. 01-10255C, 2003 WL 262521 (Bankr. M.D.N.C. Feb. 4, 2003) (unpublished) (Debtor overcame prima facie validity of mortgage holder’s arrearage claim with evidence that Chapter 13 trustee paid part of the arrearage claim in a prior Chapter 13 case.); In re Tomasevic, 275 B.R. 86 (Bankr. M.D. Fla. 2001) (Debtor’s testimony as to amount of arrearage claim rebutted presumptive validity of mortgage holder’s proof of claim when foreclosure judgment fixing the arrearage amount was not attached to the proof of claim; however, foreclosure judgment admitted as evidence at hearing established arrearage amount for purposes of res judicata.); In re Blackstone, 269 B.R. 699, 703–06 (Bankr. D. Idaho 2001) (Evidence overcame prima facie validity of state of California’s claim for child support arrearages. “The position of the California authorities, as manifested by this evidence, seems to be one of ‘if our computers say it so, then it must be so.’ . . . [A]s the objectors have produced evidence sufficient to negate the facts set out in the proof of claim, the burden reverts to the claimant to prove the validity of the claim by a preponderance of the evidence. Additionally, the ultimate burden of persuasion remains at all times upon the claimant. . . . Neither burden was met here by Orange County.”); In re Terry, 262 B.R. 657, 662 (Bankr. E.D. Va. 2001) (“[T]he claimant, DDCI, enjoyed the original presumption of prima facie validity and claim amount as a result of filing its proof of claim. . . . [D]ebtors bore the burden of introducing evidence of the invalidity or excessiveness of DDCI’s claim. At hearing on the objection, debtors presented evidence and testimony of the incomplete and inadequate nature of the DDCI repair work . . . . [D]ebtors overcame the prima facie presumptive effect given to DDCI’s proof of claim, which shifted the ultimate burden to DDCI to prove the validity of its claim by the preponderance of the evidence. DDCI’s evidence fails to establish the allowability of its claim . . . . [T]he court finds that the value of the work supports a secured claim in the amount of $6,500.00. The balance of DDCI’s claim is disallowed.”); In re Coultrap, 248 B.R. 123, 125–26 (Bankr. S.D. Ohio 2000) (Although “filing of a properly executed proof of claim constitutes prima facie evidence of the validity and amount of the claim,” the debtor “successfully rebutted this presumption” by showing that the tax claim filed by the Ohio Department of Taxation related to a business that the debtor sold before the business failed to pay taxes.); In re Verdi, 244 B.R. 314 (Bankr. E.D. Pa. 2000) (Once the debtor presented evidence that rebutted or cast doubt upon the creditor’s proof of claim, the burden of proof reverted to the claim holder; creditor failed to prove that there was consideration for the restrictive covenants in the debtor’s employment contract.); In re Ashline, 37 B.R. 136 (Bankr. N.D.N.Y. 1984) (Once debtor rebuts prima facie effect of proof of claim, IRS has burden to demonstrate the existence of an alleged partnership to sustain its claim against individual debtor for unpaid partnership taxes.).
26 Garner v. Shier (In re Garner), 246 B.R. 617, 622 (B.A.P. 9th Cir. 2000).
27 No. 01-10255C, 2003 WL 262521 (Bankr. M.D.N.C. Feb. 4, 2003) (unpublished).
28 2003 WL 262521, at *1.
29 2003 WL 262521, at *2.
30 2003 WL 262521, at *2.
31 246 B.R. 617 (B.A.P. 9th Cir. 2000).
32 246 B.R. at 623–25.
33 278 B.R. 867 (N.D. Ala. 2002).
34 278 B.R. at 878–79.
37 See, e.g., In re Barton, 249 B.R. 561, 566–67 (Bankr. E.D. Wash. 2000) (“Ford had filed a Proof of Claim alleging a secured claim of $23,004.28 which was prima facie evidence of the claim’s validity and amount. It created a rebuttable presumption that Ford has an allowed secured claim of that amount.”). But see Simmons v. Ford Motor Credit Co. (In re Simmons), 237 B.R. 672, 675 & n.2 (Bankr. N.D. Ill. 1999) (In dicta, in adversary proceeding asserting that FMCC has a practice of filing proofs of claim that improperly declare fully secured status, court observes that Official Bankruptcy Form 10 is not a statutory directive that secured claim holders accurately divide an undersecured claim into its components. “[I]t is not entirely clear that the Official Form 10 required FMCC to divide its claim into secured and unsecured component parts. The form merely asks creditors to pick one or more classifications that best describe their claim. While the form provides space for a creditor to break down its claim into secured and unsecured components, it does not appear to contain the directive that debtor claims. Indeed, it would seem somewhat inequitable to require such a division absent some access to the collateral for appraisal purposes.” In a footnote, “[o]ne year after FMCC filed its proof of claim, Official Form 10 was revised. This new form may be less likely to give rise to the type of dispute at issue here. Rather than providing space for breaking down a claim, the new form asks for the full value of a claim regardless of its classification. Then, if there is collateral securing the claim, the form further instructs creditors to describe the collateral and provides a line to supply the value of the collateral. Presumably, if a creditor does not know or is unsure of the collateral’s value, the creditor can simply indicate its lack of knowledge without compromising its secured claim.”).
38 Fed. R. Bankr. P. 3012. See § 67.3 [ Preconfirmation Valuation Disputes ] § 57.6 Preconfirmation Valuation Disputes. See also § 58.6 [ Appear and Be Heard with Respect to the Value of Collateral ] § 53.7 Appear and Be Heard with Respect to the Value of Collateral.
39 See discussion of valuation beginning at § 76.1 Valuation, Claim Splitting and Dewsnup.
40 Fed. R. Bankr. P. 3007.
41 Fed. R. Bankr. P. 7001(2). See, e.g., In re McMillan, 251 B.R. 484, 489 (Bankr. E.D. Mich. 2000) (Plan that purported to invalidate second mortgage based on Michigan Home Improvement Finance Act does not overcome allowed secured claim filed by mortgage holder to which no formal objection has been filed. “Because this dispute concerns the validity of HFC’s mortgage, Rule 7001(2) requires it to be resolved in the context of an adversary proceeding.”).
42 See In re Adams, 270 B.R. 263, 269 (Bankr. N.D. Ill. 2001) (“While the total amount of a claim filed is presumed valid until attacked, there is no presumption given to the value placed on the collateral by the creditor.”); In re Adams, 264 B.R. 901, 905 (Bankr. N.D. Ill. 2001) (“While the total amount of a claim filed is presumed valid until attacked, there is no presumption given to the value placed on the collateral by the creditor. . . . A motion for valuation of a security can be made at any time, as there are no time limits for doing that set in § 506(a) or Rule 3012. . . . The only limitation on a post-confirmation ‘strip down’ motion under Rule 3012 or valuation under § 506(a) is that the parties are bound by any valuation included in a confirmed plan where the secured creditor filed a claim preconfirmation and its asserted collateral value was not challenged before confirmation.”); In re Duggins, 263 B.R. 233, 238–44 (Bankr. C.D. Ill. 2001) (“The deemed allowance of a filed proof of claim is at most, conditional, lasting only until a party in interest objects. . . . Even the evidentiary effect is, however, limited to the claim’s ‘validity and amount’ which does not include an asserted value of collateral. . . . [T]he purpose of a proof of claim is to establish the validity and the total, unbifurcated amount of the debt. The bifurcation or valuation process contemplated by 11 U.S.C. § 506(a) is not properly part of the claims allowance process. . . . The claims allowance process is not intended to deal with secured claim valuation under 11 U.S.C. § 506(a).”); In re Fareed, 262 B.R. 761, 763–70 (Bankr. N.D. Ill. 2001) (Interpreting Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000), the claims allowance process is distinct from the valuation of collateral in Chapter 13 cases. The bankruptcy court cites Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992), for the proposition that “claim allowance under § 502 is distinct from collateral valuation under § 506(a). . . . [T]he valuation of collateral under § 506(a) involves no objection to, or disallowance of, a claim under § 502. . . . [Section] 506(a) provides its own procedure for determining the collateral value that bifurcates a claim into secured and unsecured portions . . . . No presumption is accorded to the valuation stated by the creditor. . . . [T]he distinction between motions seeking valuation of collateral under § 506(a) . . . and claim objections under § 502(b) . . . is rarely observed in the Chapter 13 practice of this district. . . . Even though . . . the claim allowance process initiated by a proof of claim deals only with the total amount of a creditor’s claim, and does not involve collateral valuation, Official Form 10, for Proofs of Claim, requires both an indication that a claim is secured, and a valuation of the collateral securing the claim. Accordingly, the common method used by debtors or other parties in interest to raise the issue of collateral valuation under § 506(a) is by filing a ‘claim objection’ asserting that collateral is overvalued in the creditor’s proof of claim. . . . There is no necessary harm in the inaccurate terminology employed in this procedure. . . . However, there remains a potential for confusion if the presumptions and procedures for genuine § 502(b) claim objections are read into the procedures for § 506(a) collateral valuation.”); In re Brown, 244 B.R. 603, 610 (Bankr. W.D. Va. 2000) (Evidentiary effect of a proof of claim in Bankruptcy Rule 3001(f) does not extend to the value of collateral securing the claim. “A proof of claim, duly executed and filed, constitutes ‘prima facie evidence of the validity and amount of the claim.’ Bankruptcy Rule 3001(f). The Court doubts . . . however, that it serves as affirmative evidence on the creditor’s behalf of the value of any security for the payment of such claim. . . . [T]he Court is of the opinion that a valuation of the creditor’s collateral securing an admittedly valid debt is different in kind than an issue of the debt’s or the security interest’s very validity.”); In re Pourtless, 93 B.R. 23 (Bankr. W.D.N.Y. 1988). See also Green Tree Acceptance, Inc. v. Calvert (In re Calvert), 99 B.R. 80 (N.D. Ala. 1988) (Because valuation of collateral for purposes of § 506(a) is not dependent upon the allowance or disallowance of claims under § 502, the value of collateral and the allowed amount of a secured claim can be separately determined notwithstanding that the creditor has filed a proof of claim to which the debtor has not objected.). But see EvaBank v. Baxter, 278 B.R. 867 (N.D. Ala. 2002) (Prima facie evidentiary effect of value of car on proof of claim is not overcome by affidavit of value from debtor that only copied NADA wholesale and retail values.).
43 See discussion of limitations on effects of confirmation beginning at § 121.1 Overview.
44 The cases so holding, and those to the contrary, are discussed in § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation. See, e.g., Universal Am. Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821, 828 (11th Cir. 2003) (Preconfirmation mortgage arrearage claim is deemed allowed and lien is not limited by confirmation of an inconsistent plan; plan that disputed arrearage amount was not an objection to the preconfirmation proof of claim. “Given the ‘deemed allowed’ language of § 502, the explicit procedures set forth in Rule 3007 to effect a proper disallowance, the existence of a secured home mortgage claim, and the failure by the debtor here, not the creditor, to follow the proper procedures, we refuse to permit an inconsistent plan provision to constitute a constructive objection by reason of the Plan’s notation of disputes alone . . . . That the Plan states an amount in conflict with the proof of claim demands a resolution of the inconsistency, but a debtor’s post-confirmation objection is not the appropriate vehicle by which to do so.”).
46 See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation.
47 See, e.g., In re Jones, 271 B.R. 397, 401 (Bankr. S.D. Ala. 2000) (Based on presumptive validity of filed proof of claim, it was not appropriate for Chapter 13 trustee to bifurcate undersecured claim according to the confirmation order when creditor filed claim after confirmation that was inconsistent with confirmed plan. Upon objection, “[t]he claim would be found to be valued precisely as indicated in the final confirmation order. Res judicata dictates this. . . . [I]n future cases, the trustee needs to pay a creditor’s claim as filed unless the debtor objects to the claim. This is a wasteful procedure admittedly because the result is predetermined. However the trustee cannot unilaterally override a proof of claim.”).
48 See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation.
49 In re Fitak, 92 B.R. 243 (Bankr. S.D. Ohio 1988).
50 An objection to claim under Bankruptcy Rule 3007 becomes an adversary proceeding if the objection is “joined with a demand for relief of the kind specified in Rule 7001.” Fed. R. Bankr. P. 3007.
51 If the objection to claim does not become an adversary proceeding, the contested matter rules apply and “no response is required under this rule unless the court orders an answer to a motion.” Fed. R. Bankr. P. 9014.
52 See Beard v. United States Trustee (In re Beard), 188 B.R. 220 (W.D. La. 1995) (Bankruptcy Rule 9014 does not prohibit the bankruptcy court from conducting a hearing on the debtors’ objection to a claim notwithstanding that the claim holder failed to file a written response to the objection. Claim holder’s objection to confirmation “probably served as the functional equivalent of a separate written response.”); In re Leary, 274 B.R. 314 (Bankr. D. Conn. 2002) (Motion for relief from order disallowing claim is denied because creditor failed to demonstrate excusable neglect for its failure to respond to the debtor’s claim objection. That a “bankruptcy specialist” at Ameriquest Mortgage received the objection but failed to pass it on to legal counsel is not an excuse.); In re Sadlier, 262 B.R. 17 (Bankr. D.R.I. 2001) (Local bankruptcy rule that requires a creditor to respond in 10 days to a written claim objection is not inconsistent with the requirement in Bankruptcy Rule 3007 that 30 days’ notice be given of a hearing on an objection to a claim.). See also Salem Five Cents Sav. Bank v. Tardugno (In re Tardugno), 241 B.R. 777 (B.A.P. 1st Cir. 1999) (One-word order denying motion to reconsider order sustaining uncontested objection to claim is vacated and remanded for findings and conclusions with respect to creditor’s contention that its failure to timely contest objection was the result of excusable neglect.).
53 Fed. R. Bankr. P. 9014.
54 Fed. R. Bankr. P. 7004(b)(3) (emphasis added).
55 Fed. R. Bankr. P. 2002(g)(1)(A).
56 See also § 36.4 List of Creditors and Addresses and § 36.5 List of Creditors—DSOs and § 342 Considerations for discussion of the addresses on the list of creditors filed by the debtor at the commencement of a Chapter 13 case.
57 246 B.R. 825 (Bankr. E.D. Va. 2000).
58 246 B.R. at 828. Accord In re Rushton, 285 B.R. 76, 79–81 (Bankr. S.D. Ga. 2002) (Objection to corporate creditor’s claim can be sent to the address on the proof of claim, but failure to signal the attention of an agent or officer renders the objection procedurally defective. “Bankruptcy Rule 2003 does not apply to service of an objection to claim. . . . The request for notices [filed by Conseco’s attorney] entitles Conseco’s attorney to receive Rule 2002 notices; but it does not designate the attorney to receive service of process in a contested matter on Conseco’s behalf . . . . The procedure for a claim objection is governed by Bankruptcy Rule 3007 . . . . [A]n objection to claim is a contested matter subject to Bankruptcy Rule 9014, which requires motions to be served in accordance with Bankruptcy Rule 7004. . . . An objection to a proof of claim of a corporate claimant under Rules 3007 and 7004(b)(3) may be sent to the address on the proof of claim. When perfecting service under Bankruptcy Rule 7004(b)(3), plaintiffs may rely on the address listed on a creditor’s proof of claim. . . . [T]he Debtors were correct in mailing the objection and notice of objection to Conseco’s address as listed in the proof of claim. However, Debtors failed to address the objection to an officer or agent and therefore did not properly perfect service. While Debtors are not required to mail service to a named individual officer or agent, at a bare minimum service must be addressed ‘to the attention of an officer, a managing or general agent or to any other agent authorized by appointment or by law to receive service of process.”); In re Stembridge, No. 00-51228 RFH, 2000 WL 33740248, at *1–*2 (Bankr. M.D. Ga. Oct. 5, 2000) (unpublished) (Order disallowing claim is void because of defective service of objection to claim. “An objection to the allowance of a claim is a contested matter governed by Rule 9014. . . . [A]n objection to claim must be served in the manner provided by Rule 7004 for service of a summons and complaint. . . . [S]ervice upon a corporation may be made by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or any agent authorized by appointment or by law to receive service of process, for the corporation. . . . Respondent did not mail his objection to the attention of an officer or an agent of Movant. The Court can only conclude that Movant was not properly served with Respondent’s objection and that Movant was not obligated to file a response.”).
59 Fed. R. Bankr. P. 7004(b)(3).
60 Fed. R. Bankr. P. 7004(h).
61 282 B.R. 546 (Bankr. S.D. Ga. 2002).
62 282 B.R. at 550–51.
63 See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation. See also § 274.1 [ Is a Plan Provision a Proof of Claim? ] § 131.5 Is a Plan Provision a Proof of Claim?. See, e.g., Universal Am. Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821, 828 (11th Cir. 2003) (“Given the ‘deemed allowed’ language of § 502, the explicit procedures set forth in Rule 3007 to effect a proper disallowance, the existence of a secured home mortgage claim, and the failure by the debtor here, not the creditor, to follow the proper procedures, we refuse to permit an inconsistent plan provision to constitute a constructive objection by reason of the Plan’s notation of disputes alone . . . . That the Plan states an amount in conflict with the proof of claim demands a resolution of the inconsistency, but a debtor’s post-confirmation objection is not the appropriate vehicle by which to do so.”); In re McMillan, 251 B.R. 484, 490 (Bankr. E.D. Mich. 2000) (Chapter 13 debtor cannot use the plan as a surrogate for an objection to the allowed secured claim of a second mortgage holder. Plan provided that second mortgage was invalidated and the debt disallowed based on the Michigan Home Improvement Finance Act. The mortgage holder filed a proof of claim to which no formal objection was filed. “[S]ince Debtor’s Plan was not an objection to HFC’s proof of claim, the proof of claim controls and Debtor’s mortgage-invalidating provision cannot be given effect.”); In re Olson, 175 B.R. 30, 32 (Bankr. D. Neb. 1994) (Confirmation of a plan that treats the IRS as a priority unsecured claim holder does not defeat the portion of the IRS’s claim that is secured by setoff in tax refund. The IRS received notice and did not object to confirmation. The debtor did not object to the IRS’s claim asserting partially secured status. Citing Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. 1985), “a debtor must object to a proof of claim in accordance with Bankruptcy Rules 3007, 9004 and 9014 to put the creditor on notice that the claim is in dispute. . . . Since the Code and the Rules do not contemplate the use of a plan as a means for objecting to proofs of claims, . . . the debtors’ plan does not act as an objection to the proof of claim, and therefore, if no objection has been made prior to confirmation, the claim must be deemed allowed for purposes of the plan. . . . The debtors’ confirmed plan does not void the IRS’s setoff right because the debtors failed to object to the IRS’s setoff claim that was set forth in the IRS’s amended proof of claim.”); In re Stein, 63 B.R. 140 (Bankr. D. Neb. 1985) (Plan and order of confirmation do not constitute objections to proof of claim. When plan and confirmation order value creditor’s collateral below the amount stated in the creditor’s proof of claim, proof of claim prevails.).
64 See discussion beginning at § 120.1 11 U.S.C. § 1327: Overview and § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation. See, e.g., In re Dennis, 230 B.R. 244 (Bankr. D.N.J. 1999) (A plan provision to pay a secured claim holder an amount that is different than what the claim holder believes it is due is a request to determine the allowance or disallowance of the claim for purposes of Rule 3002(a) and triggers the creditor’s obligation to file a proof of claim else the creditor will be bound by the confirmed plan.).
65 See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation.
66 See, e.g., In re Jones, 271 B.R. 397 (Bankr. S.D. Ala. 2000) (Debtor must object to secured proof of claim filed after confirmation notwithstanding inconsistent confirmed plan because presumptive validity of proof of claim binds Chapter 13 trustee to pay the claim as filed. The debtor’s objection will be sustained, bifurcating the claim consistent with the confirmed plan, but this “wasteful procedure” is necessary to overcome the validity of the filed proof of claim.).
67 See above in this section, and see § 120.2 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors, § 120.5 Effects of Confirmation after BAPCPA and § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation.
68 See, e.g., Universal Am. Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. 2003) (Postconfirmation objection to mortgage arrearage claim filed before confirmation is “not the appropriate vehicle” to contest the arrearage claim notwithstanding that arrearage claim was disputed in the plan and the confirmed plan is inconsistent with the preconfirmation arrearage claim. Plan itself cannot function as a “constructive objection” to the preconfirmation arrearage claim.); Adair v. Sherman, 230 F.3d 890, 896 (7th Cir. 2000) (“We respectfully choose not to follow those cases allowing postconfirmation objections to proofs of claims to be filed even though the proof of claim itself was filed sufficiently in advance of the confirmation hearing.”); In re Starling, 251 B.R. 908, 909–11 (Bankr. S.D. Fla. 2000) (“While no specific time limit to file an objection to a proof of claim is provided in Bankruptcy Rule 3007, many courts have held that an objection to a proof of claim must be filed prior to confirmation of the plan. . . . The Debtor had the opportunity to object to Chase’s claim and to adjudicate the amount of the arrearage owed to Chase prior to the confirmation hearing but failed to do so. . . . [T]he amount of Chase’s claim was resolved by the parties prior to the confirmation of the amended plan, and the confirmation of the amended plan has a preclusive effect on any litigation as to the amount of Chase’s claim.”).
69 See, e.g., Morton v. Morton (In re Morton), 298 B.R. 301 (B.A.P. 6th Cir. 2003) (Debtor can object to a secured claim after confirmation on the ground that the debtor is not personally liable; bankruptcy court erred in overruling debtor’s objection without an evidentiary hearing.); Shook v. CBIC (In re Shook), 278 B.R. 815, 831 (B.A.P. 9th Cir. 2002) (Objection to timely filed secured claim four and one-half years after confirmation is barred by laches. Debtors listed CBIC as an unsecured, nonpriority creditor. CBIC filed a timely proof of claim secured by a judgment lien. The claim was paid in full through confirmed plan. Four and one-half years later, the debtors discovered this payment and objected to the CBIC proof of claim. The BAP first held that silence in the plan with respect to CBIC’s lien was ineffective to avoid the lien and did not constitute a claim objection. Finding “prejudice is presumed from delay,” BAP concluded “Debtors simply waited too long to object to CBIC’s secured claim.”); In re Windom, 284 B.R. 644, 647–49 (Bankr. E.D. Tenn. 2002) (Because there is no deadline for objecting to claims, objection to an untimely claim three and one-half years after filing is sustained; however, disgorgement of payments would be inequitable. “[T]he Debtor, as a party in interest, does not have a deadline for objecting to a proof of claim. . . . The Debtor waited more than three years to object to this claim. The Chapter 13 Trustee began disbursements to this creditor pursuant to the Debtor’s plan based on the statutory mandate of § 502(a) that ‘[a] claim . . . proof of which is filed . . . is deemed allowed . . .’ 11 U.S.C.A. § 502(a). In the court’s opinion, the Debtor has waited an unreasonable amount of time to object.”); In re Barton, 249 B.R. 561, 565–67 (Bankr. E.D. Wash. 2000) (Debtor’s objection to secured claim five months after confirmation is not untimely and is not barred by laches or estoppel. Form plan provided that the allowed amount of secured claims would be the amount stated on a proof of claim unless the court determined a different amount after the filing of a separate motion to value the claim or the filing of an objection to claim. The confirmed plan valued Ford’s collateral at $15,000. Before confirmation, Ford filed a proof of claim for $23,004.38 designated as fully secured. Five months after confirmation, the debtor objected to Ford’s claim, arguing the collateral was worth only $8,500. Confirmed plan had no preclusive effect on the debtor’s objection. With respect to timeliness of the objection: “[T]here is no statute or court rule which contains a deadline for filing objections to claims. . . . [Section] 506(a) does not lead to a conclusion that objections to claims based on the value of collateral must be determined at confirmation. . . . Ford had filed a Proof of Claim alleging a secured claim of $23,004.28 [sic] which was prima facie evidence of the claim’s validity and amount. It created a rebuttable presumption that Ford has an allowed secured claim of that amount. . . . The claim was deemed allowed under § 502(a). Under these principles of bankruptcy law, it is difficult to perceive how Ford could have relied upon the value referenced in the plan as determining its right to an allowed secured claim. . . . The delay in this case was caused in great part by the change in counsel for the debtor. . . . [T]he five months of delay between the plan confirmation and the filing of the objection to claim is [sic] excused due to the circumstances surrounding the required change of counsel.”).
70 See also § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation.
72 254 B.R. 449 (Bankr. D. Minn. 2000), rev’d, 263 B.R. 881 (B.A.P. 8th Cir. 2001), aff’d, 278 F.3d 866 (8th Cir. 2002).
73 263 B.R. at 884–85.
74 278 F.3d at 868.
75 See, e.g., 28 U.S.C. § 157(I) (“determinations as to the dischargeability of particular debts”), and (O) (“other proceedings affecting . . . the adjustment of the debtor-creditor . . . relationship.”).
77 11 U.S.C. § 502(j). See also Fed. R. Bankr. P. 3008 (“A party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. The court after a hearing on notice shall enter an appropriate order.”).
78 In re Bernard, 189 B.R. 1017, 1021 (Bankr. N.D. Ga. 1996) (“When read collectively, sections 1327(a), 502(a) and 502(j), therefore, appear to direct that confirmation implicitly decides claim validity and, after confirmation, the section 502(j) ‘motion to reconsider’ presents the only means by which a claim’s validity may be questioned.”).
79 See, e.g., In re Smith, No. 4:99-BK-43969, 2003 WL 261921, at *4–*6 (Bankr. E.D. Ark. Feb. 5, 2003) (unpublished) (“[B]ecause Jefferson’s allowed claim is inconsistent with the Debtor’s confirmed plan, cause exists for the Court to reconsider Jefferson’s allowed claim under 11 U.S.C. § 502(j) . . . . [T]he process which results in a final order first controls the result, provided that due process was provided. In this case, an order confirming the plan was entered after notice to the creditor prior to the order allowing the creditor’s claim, and as a consequence, the confirmed plan determines the amount of the creditor’s claim, not the order entered later which allowed the claim.”), on reconsideration, 290 B.R. 102 (Bankr. E.D. Ark. 2003) (Cause to permit reconsideration of claim under § 502(j) two and one-half years after notice and order fixing deadline to object to claims when debtor proved that the claim was filed in bad faith, for an overstated amount and based on a forged sales contract.).
80 In re Bernard, 189 B.R. 1017 (Bankr. N.D. Ga. 1996).
81 See, e.g., In re Zieder, 263 B.R. 114, 117 (Bankr. D. Ariz. 2001) (When Chapter 13 debtor surrenders pickup truck a year after confirmation, § 502(j) permits reconsideration of secured claim and § 506(a) reduces the allowed secured claim to zero. “Section 502(j) permits reconsideration of claims ‘according to the equities of the case.’” No language in § 502(j) or Rule 3008 limits such reconsideration by confirmation of a plan. To the contrary, because the Code provision deals extensively with the effect such reconsideration might have on distributions already made on claims, it contemplates that such reconsideration might occur after confirmation. . . . [B]ankruptcy courts have wide discretion in determining what will constitute adequate ‘cause’ for reconsideration of claims.”); In re Johnson, 247 B.R. 904, 906–09 (Bankr. S.D. Ga. 1999) (Debtors can surrender collateral after confirmation and upon a showing of good faith reconsider the deficiency as an unsecured claim under § 502(j). “I agree with [In re Coleman, 231 B.R. 397 (Bankr. S.D. Ga. 1999),] that § 1329 does not permit a postconfirmation reclassification of a secured claim. However, Section 1329 deals with plan modification not claim allowance. Section 502 provides for the allowance or disallowance of claims. In this instance, § 502(j) controls. Section 502(j) provides: ‘(j) A claim that has been allowed or disallowed may be reconsidered for cause.’ . . . After surrender of collateral, the deficiency portion of the claim is no longer actually secured. A claim simply cannot be secured when nothing secures it. Any deficiency debt is therefore by definition unsecured. . . . [T]he plan must provide the same treatment for each claim within a particular class. . . . The unsecured deficiency claim must be treated as all other unsecured claims allowed by the plan. To allow the claim as secured fails to treat all claims equally within a particular class. Section 502(j) is available to redress that inequity. Section 502(j) considers the good faith of both the debtor and the affected creditor. ‘A reconsidered claim may be allowed or disallowed according to the equities of the case.’ 11 U.S.C. § 502(j). . . . The Johnsons . . . testified that they wished to surrender the collateral because Annette Johnson was no longer working, they were living with her mother and they could no longer afford their current plan payment. . . . [U]nder the circumstances established by the debtor’s testimony, they are not acting in bad faith. . . . [R]econsideration of the claim is appropriate.”); In re Lee, 189 B.R. 692, 696 (Bankr. M.D. Tenn. 1995) (Section 502(j) and Bankruptcy Rule 3008 permit Chapter 13 trustee’s motion to reconsider allowance of claim where checks are returned for lack of adequate address after confirmation. U.S. trustee’s argument that § 347(a) requires unclaimed funds to be paid into court registry is rejected because § 347(a) applies only to “final distribution” and not to payments while Chapter 13 plan is still active. Reconsideration is appropriate because disallowance will return unclaimed funds to the Chapter 13 trustee for distribution to other unsecured claim holders.). See also 1st Franklin Fin. Corp. v. Barkley (In re Anthony), 302 B.R. 843, 855–56 (Bankr. N.D. Miss. 2003) (Claims reconsideration under § 502(j) supports Chapter 13 trustee’s lawsuit after confirmation and after claims allowance asserting that lender engaged in deceptive credit life and credit disability insurance transactions. “[T]he allegations, posited by the Trustee [are] that 1st Franklin engaged in a deceptive, surreptitious scheme to defraud the Chapter 13 debtors by charging inflated insurance premiums. If these allegations can indeed be substantiated, 1st Franklin would be culpable for filing fraudulent claims in this court. As such, these claims can be reconsidered pursuant to § 502(j) . . . in keeping with the ‘cause’ requirements specified by Bankruptcy Rule 9024 . . . . This, in effect, would allow the court to abrogate the effects of the confirmation orders and the orders previously allowing 1st Franklin’s claims.”); Tate v. NationsBanc Mortgage Corp. (In re Tate), 253 B.R. 653 (Bankr. W.D.N.C. 2000) (Bankruptcy court sustains class action by Chapter 13 debtors to recover “Bankruptcy Fees” included in proofs of claim filed by NationsBanc. That orders allowing claims had been entered in many of the cases was not preclusive because NationsBanc failed to follow the procedure in Bankruptcy Rule 2016 for seeking fees, and allowed claims “may be reconsidered at any time for cause” under § 502(j).). But see In re Bernardes, 267 B.R. 690, 693–94 (Bankr. D.N.J. 2001) (Wholly unsecured third mortgage holder’s postconfirmation motion to reconsider its claim under § 502(j) fails notwithstanding that real property appreciated from $114,500 to $202,500 in eight months between confirmation and debtor’s (withdrawn) motion to sell. Debtor scheduled real property at $114,500. Based on that value, wholly unsecured third mortgage holder was treated as an unsecured creditor through the confirmed plan. Eight months after confirmation, debtor moved to sell property for $202,500. Third mortgage holder objected to sale and moved to reconsider its claim under § 502(j). “Without deciding whether § 502(j) contemplates the reconsideration of claims after confirmation, the court concludes that there is no sound basis for reconsideration in this case. . . . Pursuant to § 1325(a)(5)(B)(ii), the value of collateral establishing the status of a secured claim is to be determined as of the ‘effective date of the plan.’ . . . 11 U.S.C. § 502(j) may not be employed to change the valuation date of collateral.”).
82 See In re Carr, 134 B.R. 370, 372 (Bankr. D. Neb. 1991) (Amended claim filed by IRS 15 months after the Chapter 13 trustee’s motion to allow claims was not automatically allowed and did not increase the amount that the debtor was required to pay. IRS had responsibility under Bankruptcy Rule 3008 to move for reconsideration of its claim. “If an amended proof of claim is filed after confirmation of a Chapter 13 plan and after the court has entered an order allowing claims, the amended proof of claim does not become an allowed claim unless the moving party makes a motion to reconsider claims under Bankruptcy Rule 3008, or takes some other appropriate action.” Because the plan provided for payment of the IRS claim in the amount stated in the original proof and no motion for reconsideration was filed, the Chapter 13 debtor is entitled to a discharge of the difference between the original and the amended claim upon completion of payments under the plan.). See also In re Duke, 153 B.R. 913, 916–17 (Bankr. N.D. Ala. 1993) (Creditor cannot use Bankruptcy Rule 3008 or a motion to reconsider under Bankruptcy Rule 9023 to challenge a two-month-old order sustaining the trustee’s objection to the creditor’s claim where an order confirming a plan has also been entered. Creditor filed a proof of claim asserting secured status but attached no proof of security. Chapter 13 trustee objected. Notice was sent to the creditor warning that it had to respond to the trustee’s objection within 14 days else the court would deem the objection confessed. Creditor failed to timely respond, and an order was entered sustaining the trustee’s objection to the creditor’s assertion of secured status. A plan was then confirmed, treating the creditor as an unsecured creditor to be paid pro rata through the plan. Two months later, the creditor moved to reconsider the order sustaining the trustee’s objection to its claim. Although there is no time limit in Bankruptcy Rule 3008 with respect to a motion to reconsider an order allowing or disallowing a claim, “[b]ecause of the binding effect of the confirmation order under § 1327(a), the rights of the creditors are fixed and subsequent reconsideration under Rule 3008 is not permissible. . . . The claims allowance process, which can encompass the implementation of, inter alia, 11 U.S.C. §§ 502 and 506 as well as Rules 3007, 3008, and 3012, is a process that occurs pre-confirmation. . . . Because of the binding effect of 11 U.S.C. § 1327(a) on creditors when a confirmed plan fixes the allowed amount of a creditor’s claim, this Court is not permitted to reconsider the order entered which sustained the trustee’s contest of [the creditor’s] proof of claim.”).
83 See § 170.1 [ Methods of Paying Unsecured Claims ] § 101.3 Methods of Paying Unsecured Claims.
84 This will be true anytime the allowance of the next unsecured proof of claim will not increase the amount that the debtor must pay to complete payments under the plan.
85 See discussion of grounds for relief from the codebtor stay beginning at § 67.2 Plan Does Not Pay Debt in Full.
86 11 U.S.C. § 502(b)(2) provides: “If such objection to a claim is made, the court . . . shall allow such claim . . . except to the extent that— . . . (2) such claim is for unmatured interest.”
87 See § 89.1 [ Postpetition Interest, Attorneys’ Fees, Costs and Other Charges ] § 67.3 Postpetition Interest, Attorneys’ Fees, Costs and Other Charges. See also discussion of the separate classification of codebtor claims in § 150.1 [ Co-signed Debts ] § 87.3 Co-signed Debts.
89 See Leeper v. Pennsylvania Higher Educ. Assistance Agency (In re Leeper), 49 F.3d 98 (3d Cir. 1995) (Applying Bruning v. United States, 376 U.S. 358, 84 S. Ct. 906, 11 L. Ed. 2d 772 (1964), unmatured, postpetition interest on a nondischargeable student loan is not allowable under § 502(b)(2) but continues to accrue as a personal liability of the debtor in a Chapter 13 case.); Wagner v. Ohio Student Loan Comm’n (In re Wagner), 200 B.R. 160 (Bankr. N.D. Ohio 1996) (Citing Bruning v. United States, 376 U.S. 358, 84 S. Ct. 906, 11 L. Ed. 2d 772 (1994), and United States v. River Coal Co., 748 F.2d 1103 (6th Cir. 1984), interest that accrued on a nondischargeable student loan during a Chapter 13 case is nondischargeable after the completion of payments under the plan notwithstanding that the debtor paid 100% of the filed claims and the last checks issued by the trustee were noted “paid in full.”); In re Shelbayah, 165 B.R. 332 (Bankr. N.D. Ga. 1994) (Although underlying student loan claim is nondischargeable under §§ 523(a)(8) and 1328(a), and even though student loan will continue to accrue interest postpetition that will also be nondischargeable, unmatured postpetition interest is not allowable as part of student loan claim and cannot be paid through the Chapter 13 plan.).
90 See In re Slater, 188 B.R. 852, 856 (Bankr. E.D. Wash. 1995) (Interest on child support arrearages allowed in state court judgment and under Washington state law is nondischargeable notwithstanding that plan paid principal amount of arrearages in full. In a case filed before October 22, 1994, “even though the debtor’s plan does not provide for interest on the non-dischargeable child support debt, the plan is confirmable because the interest may continue to accrue against the debtor to be recovered from the debtor personally at the conclusion of the case.” Attorney’s fees awarded to former spouse’s attorney are in the nature of support and are also nondischargeable. Court cites Bruning v. United States, 376 U.S. 358, 84 S. Ct. 906, 11 L. Ed. 2d 772 (1964), and Leeper v. Pennsylvania Higher Education Assistance Agency (In re Leeper), 49 F.3d 98 (3d Cir. 1995).); In re Crable, 174 B.R. 62 (Bankr. W.D. Ky. 1994) (Nondischargeable judgment for prepetition child support arrearages accumulates postpetition and postconfirmation interest at the Kentucky statutory rate of 12%; plan payment of arrearages without interest does not defeat the former spouse’s right to postpetition and postconfirmation interest. Citing Bruning v. United States, 376 U.S. 358, 84 S. Ct. 906, 11 L. Ed. 2d 772 (1964), and analogizing to student loans, child support arrearages are nondischargeable and accrue postpetition and postconfirmation interest, and the accumulating interest is nondischargeable upon completion of payments. However, during the Chapter 13 case, the arrearage claim holder cannot have an allowable claim for the postpetition (unmatured) interest.). But see Silverstein v. Glazer (In re Silverstein), 186 B.R. 85, 87 (Bankr. W.D. Tenn. 1995) (Interest on state court judgment for child support arrearage pursuant to general state statute for interest on all judgments is not actually in the nature of support and therefore dischargeable in § 523(a)(5) proceeding.).
91 See §§ 289.1 [ Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon ] § 135.6 Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon and 290.1 [ Untimely Filed Claims in Cases Filed after October 22, 1994 ] § 135.7 Untimely Filed Claims in Cases Filed after October 22, 1994.
92 256 B.R. 661 (Bankr. D. Conn. 2000).
93 253 B.R. 672 (Bankr. D.S.C. 2000).
94 274 B.R. 686 (Bankr. W.D. Tex. 2002).
95 254 B.R. 687 (B.A.P. 6th Cir. 2000), aff’d, No. 00-4523, 2001 WL 700801 (6th Cir. June 15, 2001) (unpublished), cert. denied, 534 U.S. 1021, 122 S. Ct. 548, 151 L. Ed. 2d 425 (2001).
96 Case No. 98-14378-MAM, Adv. No. 99-1136 (Bankr. S.D. Ala. May 10, 2002) (Text available at www.alsb.uscourts.gov).
97 See § 138.2 Claims for Creditors’ Attorneys’ Fees and § 138.3 Creditors’ Attorneys’ Fees: New Recovery Rights after BAPCPA for further discussion of Slick.
98 278 B.R. 457 (Bankr. E.D. Tenn. 2002).
99 302 B.R. 843 (Bankr. N.D. Miss. 2003).
100 302 B.R. at 855.