Cite as: Keith M. Lundin, Lundin On Chapter 13, § 53.15, at ¶ ____, LundinOnChapter13.com (last visited __________).
The Chapter 13 trustee has the duty to examine proofs of claim and object to claims “if a purpose would be served.”1 In Chapter 13 cases, it is almost always true that a purpose would be served by examining and objecting to claims because allowed claims are paid in whole or in part and a successful objection affects the amount that must be paid into the plan, the amount paid to allowed claim holders, the duration of the plan, the timing of payments, the feasibility of the plan and so forth. The trustee’s duty to review and object to claims includes challenging security interests and initiating appropriate avoidance or recovery actions.2
Reviewing and objecting to claims is a power shared by the Chapter 13 debtor and the trustee.3 In some jurisdictions, the Chapter 13 trustee routinely reviews all proofs of claim and files appropriate written objections. In other jurisdictions, the trustee prepares a “motion to allow claims” at the close of the claims-filing period and the principal responsibility to object to claims then falls on the debtor.4 It is difficult for the Chapter 13 trustee to know which claims are correct and which are not. The debtor typically has the information necessary to make that assessment. Even in jurisdictions where the Chapter 13 trustee files objections to claims, the trustee needs help from the debtor to identify objectionable claims.
The management of tardy claims presents some difficulties for Chapter 13 trustees. Discussed in more detail elsewhere,5 claims filed after the 90-day and 180-day deadlines in Bankruptcy Rule 3002 and in § 502(b)(9) of the Code are disallowable upon objection. But practice varies dramatically whether tardily filed claims are routinely objected to by the trustee.
In some jurisdictions, the Chapter 13 trustee files a form objection to every tardily filed claim, and in the absence of opposition from the creditor or debtor, the tardy claim is disallowed.6 In other jurisdictions, exactly the opposite practice prevails: the trustee files a motion to allow each tardily filed claim, and in the absence of objection, the tardy claim is allowed—sometimes subject to special provisions, for example, payment after timely filed claims. Under either practice, the Chapter 13 trustee performs the critical function of reviewing claims for timeliness and the trustee’s action then determines whether tardy claims are routinely allowed or disallowed. One reported decision notes that a Chapter 13 trustee’s obligation to object to claims when a “purpose would be served” might or might not require objection to a tardy claim filed by an unscheduled creditor, depending on the terms of the plan and on whether allowance would affect distributions under the plan.7
One court has suggested that the Chapter 13 trustee’s obligation to review and object to claims may not end at conversion to Chapter 7. Detailed elsewhere,8 the courts are not in agreement about the proper disposition of funds held by the Chapter 13 trustee at conversion to Chapter 7. Depending on the rule in the district, notwithstanding that conversion terminates the services of the Chapter 13 trustee,9 some courts require the trustee to distribute the funds on hand to creditors consistent with the confirmed plan. In In re Pegues,10 the bankruptcy court held that the Chapter 13 trustee has authority to object to claims after conversion to Chapter 7 to complete the distribution of funds on hand to (only) creditors with allowed claims. Pegues raises the question whether Chapter 13 trustees are obligated to review and object to claims after conversion, at least in districts that require a final distribution to creditors after conversion.
The Chapter 13 trustee also shares with the debtor the power to file a proof of claim on behalf of a creditor that has failed or refused to file a proof of claim.11 In some jurisdictions, the Chapter 13 trustee routinely files proofs of claim on behalf of certain kinds of creditors. For example, if the debtor proposes to pay a home mortgage through the plan in a specific monthly amount, some Chapter 13 trustees file a proof of claim on behalf of the mortgagee to guarantee that mortgage payments will begin immediately upon confirmation and stay current. Claims for alimony or support that would be nondischargeable in the Chapter 13 case12 are often filed by trustees (or debtors) on behalf of the former spouse to ensure payment through the plan. Trustees will sometimes file a proof of claim on behalf of the IRS or other creditor entitled to full payment under 11 U.S.C. § 1322(a)(2)13 to ensure that the creditor is paid in full through the plan. This strategy makes sense when there is a codebtor—a nonfiling spouse, for example—who will be required to pay the claim if the claim is not allowed and paid in the plan. The strategy does not make sense if the claim will be discharged for failure of the priority claim holder to timely file a claim14 and there is no codebtor in need of protection.
The Chapter 13 trustee may file a proof of claim on behalf of a creditor to join issue on the allowance of the claim notwithstanding the creditor’s failure to file a claim on its own behalf. This would be useful, for example, to determine the extent of a lien when a secured claim holder has missed the deadline for filing a claim but is provided for by the plan.15
1 11 U.S.C. § 704(5), incorporated into Chapter 13 by 11 U.S.C. § 1302(b)(1).
2 See § 60.1 [ Avoidance and Recovery Powers ] § 53.12 Avoidance and Recovery Powers. See, e.g., Hildebrand v. Hays Imports, Inc. (In re Johnson), 279 B.R. 218 (Bankr. M.D. Tenn. 2002) (Chapter 13 trustee’s duty to review claims and object to claims includes challenging a security interest; when car lender filed a postconfirmation proof of claim revealing that its security interest was either an avoidable preference under § 547 or an unauthorized postpetition transfer under § 549, trustee could either file an adversary proceeding or file an objection to the claim under Bankruptcy Rule 3007.).
3 See Kerney v. Capital One Fin. Corp. (In re Sims), 278 B.R. 457, 482 (Bankr. E.D. Tenn. 2002) (In a class action by standing trustee and debtors alleging systematic overstatement of proofs of claim by Capital One Financial, “[c]learly, the trustee has standing to object to claims . . . because one of the specified duties of a trustee under 11 U.S.C. § 704(5) is to, ‘if a purpose would be served, examine proofs of claims and object to the allowance of any claim that is improper.’ 11 U.S.C. § 1302(b)(1) provides that a chapter 13 trustee is to perform the duty specified in § 704(5).”); Rau v. Bender (In re Gilman), 59 B.R. 234 (Bankr. D. Ariz. 1986) (The Chapter 13 trustee has standing to object to the allowance of claims.). 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 for a discussion of the debtor’s power to review and object to claims.
4 See § 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1 Timing, Procedure and Evidence Presumption. See also Marlow v. Sweet Antiques (In re Marlow), 216 B.R. 975 (Bankr. N.D. Ala. 1998) (Failure of debtor to object to trustee’s motion to allow claims is one reason why debtor cannot avoid an allowed claim holder’s preferential judgment lien.).
5 See §§ 283.1 [ Unscheduled Creditors ] § 133.2 Unscheduled Creditors before BAPCPA, 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 See In re McLarry, 273 B.R. 753, 754 (Bankr. S.D. Tex. 2002) (“The chapter 13 trustee has a duty to object to claims filed after the deadline.”).
7 See In re Miranda, 269 B.R. 737, 742 (Bankr. S.D. Tex. 2001) (The trustee might choose not to object to allowance of a tardy claim filed by an unscheduled creditor if allowance of the claim would not matter. “For example, if the plan provided for no distributions to unsecured creditors . . . the issue would be moot. Or, distributions to unsecured creditors might not yet have begun . . . . Or, the plan might provide for 100% payment to unsecured creditors.”).
8 See §§ 315.1 [ In Cases Filed before October 22, 1994 ] § 143.1 In Cases Filed before October 22, 1994 and 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2 In Cases Filed after October 22, 1994.
9 See 11 U.S.C. § 348(e).
10 266 B.R. 328 (Bankr. D. Md. 2001).
11 Fed. R. Bankr. P. 3004. See §§ 285.1 [ Timing, Form, Superseding and Amended Claims ] § 134.1 Timing, Form, Superseding and Amended Claims before 2005 and 286.1 [ Strategic Considerations: When to File Claims for Creditors ] § 134.3 Strategic Considerations: When to File Claims for Creditors.
12 See §§ 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994, 303.1 [ Alimony, Maintenance and Support in Cases Filed before October 22, 1994 ] § 138.1 Alimony, Maintenance and Support in Cases Filed before October 22, 1994 and 345.1 [ Alimony, Maintenance or Support ] § 158.1 Alimony, Maintenance or Support.
13 See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1 Plan Must Provide Full Payment, 99.1 [ What Claims Are Priority Claims? ] § 73.2 What Claims Are Priority Claims? and 291.1 [ Treatment of Priority Claims ] § 136.1 Treatment of Priority Claims.
14 See §§ 288.1 [ Failure to File Proof of Claim ] § 135.5 Failure to File Proof of Claim–290.1 [ Untimely Filed Claims in Cases Filed after October 22, 1994 ] § 135.7 Untimely Filed Claims in Cases Filed after October 22, 1994.
15 See §§ 280.1 [ Secured Claim Holders ] § 132.7 Secured Claim Holders and 286.1 [ Strategic Considerations: When to File Claims for Creditors ] § 134.3 Strategic Considerations: When to File Claims for Creditors.