§ 135.6 — Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon

Revised: January 15, 2010

[1]

In Chapter 13 cases filed before October 22, 1994, neither the Bankruptcy Code nor the Rules prescribed a treatment for untimely filed proofs of claim. In Chapter 7 cases, § 726 of the Code specifically affords “tardily filed” claims a second or third priority of distribution, depending on whether the claim holder had notice or actual knowledge of the case in time to timely file a proof of claim.1 Under § 726, a tardy claim in a Chapter 7 case is an allowed claim; it may be reduced in its priority for distribution. There is no similar provision with respect to tardy claims in Chapter 13 cases. Prior to amendment in 1994, § 502 of the Code contained no explicit provision imposing disallowance as the consequence of tardy filing of a proof of claim.2 Thus, in Chapter 13 cases filed before October 22, 1994, the controversy raged whether untimely filed proofs of claim were disallowed. This controversy went away when the last claim was litigated in a Chapter 13 case filed before October 22, 1994.

[2]

Prior to 1992, a great many courts held or suggested that a proof of claim filed after 90 days after the first date set for the meeting of creditors was untimely in a Chapter 13 case under (former) Bankruptcy Rule 3002(c), with the consequence that the claim was disallowed.3 Several of the reported decisions were quite specific that a secured or unsecured claim holder with an untimely filed proof of claim forfeited the right to distributions under a confirmed plan.4 These courts were not nearly so specific whether this loss of the right to distributions was based on the Code or Rules or on a provision of the confirmed plan.

[3]

Disallowance under the Code has significant consequences beyond the loss of priority or forfeiture of distributions. For example, disallowance triggers the voiding of liens under 11 U.S.C. § 506(d).5

[4]

In 1992, the Bankruptcy Court for the District of Minnesota set off a firestorm of controversy by holding in In re Hausladen6 that the failure of a creditor to file a proof of claim within the 90 days specified in (former) Bankruptcy Rule 3002(c) was not fatal to allowance in a Chapter 13 case. The Hausladen court summoned arguments in support of this holding from the structure of the Code, from legislative history and from provisions of the former Bankruptcy Act:

Section 501 tells us who can file a claim; it does not set out the time limits for filing. Legislative history tells us that “[t]he Rules of Bankruptcy Procedure will set the time limits, the form, and the procedure for filing, which will determine whether claims are timely or tardily filed.” . . . Rules 3002(a) and 3002(c) do not explicitly say but imply that filing within the prescribed period is a prerequisite to allowance. This erroneous reading arose when the drafters of the new Rule 3002 hastefully copied the substance of old Rule 302 without paying any attention to the major change in the underlying statute. Under the Bankruptcy Act, late claims were explicitly disallowed. Section 57(n) of the Act. . . . The old Bankruptcy Rule implemented this time bar. However, a time bar does not expressly exist under the Code or Rules. . . . Under Section 57(n) of the Act it was a bar date; however, under Section 502 of the Code it is not. . . . Section 502 . . . sets out eight specific grounds for disallowing claims. Tardy or late filing is not one of them. . . . [A]llowing tardily filed claims does not conflict with any other section of the Code. . . . [W]hile not directly applicable in a Chapter 13 case, § 726 supports our conclusion that tardily filed claims should be allowed. Among the priorities of distribution in section 726(a) are allowed unsecured claims which are “timely filed” and those which are “tardily filed.” . . . [A]bsent some other basis of disallowance, tardily filed claims are allowed and entitled to distribution if there is enough money. While we recognize that section 726 applies only to Chapter 7 cases, it is a clear illustration of the principal [sic]: while treatment of a claim may be dependent on its timeliness, allowance is not. . . . The rights of tardily filing claim holders in Chapter 13 cases are not defined by the Code but rather are controlled by the Chapter 13 plan. See 11 U.S.C. § 1322(b)(10). . . . The plan may provide that tardily filed claims be paid after timely filed claims are paid in full or for no payment at all. The plan may provide identical treatment for all allowed unsecured claims, regardless of timeliness or for payment at a different percentage than timely filed claims.7
[5]

Hausladen inspired litigation over the allowance of untimely filed claims across the country in Chapter 13 cases filed before October 22, 1994. The reported decisions agreeing (more or less) with Hausladen include In re Waindel8 from the U.S. Court of Appeals for the Fifth Circuit and a split of authority within the Bankruptcy Court for the District of Colorado.9 Earlier decisions supporting Hausladen from the Bankruptcy Appellate Panel for the Ninth Circuit and from bankruptcy courts in Michigan and Tennessee were reversed.10 At least two other courts of appeals have offered some support for the Hausladen point of view, but in Chapter 7 cases.11

[6]

The U.S. Courts of Appeals for the Sixth and Ninth Circuits disagreed with Hausladen. In IRS v. Chavis (In re Chavis),12 the Sixth Circuit rejected Hausladen and distinguished the contrary authority from other circuits:

        Notwithstanding the Second and Ninth Circuits’ decisions (in [United States v. Vecchio (In re Vecchio), 20 F.3d 555 (2d Cir. 1994),] and [United States v. Towers (In re Pacific Atlantic Trading Co.), 33 F.3d 1064 (9th Cir. 1994),] respectively), we believe that the Bankruptcy Code and Rules can be harmonized: § 501 creates the substantive right to file a claim and identifies the parties holding that right; § 502 states that a claim, filed in accordance with § 501, is allowed unless a party in interest objects; § 501 contemplates a timeliness requirement; Rule 3002 designates when a claim is timely filed (i.e., § 501 incorporates Rule 3002); and, because § 501 incorporates Rule 3002, and because § 502 presupposes compliance with § 501, compliance with Rule 3002 (i.e., timeliness) is a prerequisite to § 502 allowance. The Bankruptcy Code’s legislative history supports this result. Indeed, Congress anticipated that the Rules of Bankruptcy Procedure would set the time limits, the form, and the procedure for filing claims.
        Moreover, there are fundamental differences between Chapter 7 and Chapter 13 bankruptcies that effectively limit the Second and Ninth Circuit decisions (in Vecchio and Pacific Atlantic Trading) to Chapter 7 actions. In a Chapter 7 action, the debtor’s non-exempt assets are liquidated and the proceeds are distributed to the creditors. Accordingly, even late-filed claims must be paid before any distribution to the debtor may be made. In a Chapter 13 action, the debtor retains the assets in exchange for an agreement to make periodic payments to the creditors. The payments to the creditors must equal or exceed the amount that the creditors would receive under Chapter 7. See 11 U.S.C. § 1325(a)(4). If late-filed claims are not barred in Chapter 13 actions, it would not be possible to determine, with finality, whether a Chapter 13 plan satisfies this standard. Moreover, because Chapter 13 serves as a flexible vehicle for the repayment of allowed claims, all unsecured creditors seeking payment under a Chapter 13 plan must file their claims on a timely basis so that the efficacy of the plan may be determined in light of the debtor’s assets, debts and foreseeable earnings.13
[7]

There are many reported decisions from lower courts supporting the Sixth Circuit’s view that untimely filed claims were disallowed in Chapter 13 cases filed before October 22, 1994.14 As explained by the Bankruptcy Court for the Western District of Michigan in In re Zimmerman,15 Hausladen made two errors of analysis and one mistake of policy:

In order to reach the conclusion that it did, the [In re Hausladen, 146 B.R. 557 (Bankr. D. Minn. 1992),] court had to deal with the language of Fed.R.Bankr.P. 3002, which quite clearly poses a time bar against the late filing of claims. It could do this by either invalidating the rule or reading the time bar out of the rule. It chose to do the latter. . . . This conclusion ignores the legislative history, which clearly establishes an intent to place substantive considerations in the Code and procedural considerations in the Rules.
        The legislative history of § 501 explicitly recognized that the task of setting time limits would fall to the Bankruptcy Rules and further envisioned those time limitations as constituting a bar to the filing of late claims[.]
        Despite the clear language of both the legislative history and Fed.R.Bankr.P. 3002, the Hausladen court . . . concluded that “a time bar does not expressly exist under the Code or Rules.” . . . This is true only under the most strained reading of the rule, which states only claims filed in accordance with the rule (i.e. timely claims) may be allowed. . . .
        The second error which the Hausladen court made resulted from an unfortunate double meaning which bankruptcy courts and practitioners commonly attach to the term “disallowed.” Although that term appears nowhere in § 502, it is common to describe a claim that falls within § 502(b)’s enumerated exceptions as being “disallowed.” Likewise, that term has been used with respect to claims that cannot be allowed because they are not filed “in accordance with” Fed.R.Bankr.P. 3002. . . . [W]hether a claim is eligible to be considered under § 502 at all depends upon its proper and timely filing. The use of the term “disallow” in the context of both the procedural test in Fed.R.Bankr.P. 3002 and the substantive test in § 502 glosses over this fact. . . . [T]he word “bar” . . . is perhaps more accurate when referring to late claims, as the effect of Fed.R.Bankr.P. 3002 is to prevent the claim from moving forward in the process toward treatment under § 502. . . . Hausladen implicitly presumes that barring a claim as untimely, and thus preventing it from ever being “deemed allowed” under § 502(b), is the equivalent of “disallowing” the claim under § 502(b). This presumption is supported neither by statute nor court rule. . . . Policy Considerations strongly support the necessity of a bar date in bankruptcy reorganizations. . . . A bar date is necessary so that a reorganization plan may more easily be formulated. . . . [A] plan can only be administered after all claims against the estate have been filed. . . . [A]pplication of the . . . confirmation standards would be impossible if the calculations were subject to change due to the filing of late claims. . . . The debtor and all timely filing creditors benefit from the claims bar date because the case can be administered much more efficiently. . . . [N]o injustice results by barring late claims of unsecured creditors who have timely notice of the bar date.16
[8]

In Chapter 13 cases filed before October 22, 1994, there were at least five arguments from statutory interpretation to support the view that an untimely filed proof of claim was not disallowed. (The Code references in the list below are before amendment by the Bankruptcy Reform Act of 1994, except as indicated.)

 

 1.
Section 502 lists many grounds for allowing and disallowing claims but nowhere mentions the timeliness of the filing of a proof of claim. One would expect such a fundamental bar to the allowance of a claim to be listed in § 502 if so intended by Congress, particularly in light of the clear provisions of the former Bankruptcy Act that disallowed untimely claims.17 That Congress amended § 502(b)(9) in 1994 to explicitly state that untimely filed claims are disallowed is evidence to some that the 1978 version of the Code did not bar the allowance of untimely claims in Chapter 13 cases filed before October 22, 1994.18
 

 

 

 

 2.
Section 501(b) and (c) authorize the debtor, the trustee and codebtors to file proofs of claim on behalf of a creditor “if a creditor does not timely file a proof of such creditor’s claim.”19 Why would Congress authorize others to file a proof of claim on behalf of a creditor if the failure of a creditor to “timely file a proof of such creditor’s claim” automatically prohibited allowance of that claim? It has to be that Congress contemplated some other consequence for the untimely filing of a claim, else the authorization for others to file “untimely” claims makes no sense.
 

 

 

 

 3.
Section 506(d) provides that a lien is void to the extent it purports to secure a claim that is “not an allowed secured claim,” unless “such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under § 501 of this title.”20 In other words, a lien is void to the extent it is not supported by an allowed secured claim unless the only reason that the claim is not allowed is the failure of any entity to file a proof of claim under § 501. The failure of any entity to file a proof of claim under § 501 would, of course, result in disallowance of the claim because the filing of a proof of claim is the predicate for allowance under §§ 501 and 502(a).21 If disallowance is the appropriate consequence of the untimely filing of a proof of claim, then why is untimely filing omitted as an exception to the voiding power in § 506(d)? Could it be that Congress intended to allow debtors to void liens when a claim fails of allowance because it was untimely filed but to withhold the power to void liens when the claim is not allowed due to the failure to file a proof of claim altogether? This makes no sense, and it produces bizarre tactical possibilities. It is more reasonable that untimeliness is not mentioned as an additional exception to the voiding power in § 506(d)(2) because untimeliness does not automatically result in disallowance of the underlying claim.
 

 

 

 

 4.
Section 726(a)(2)(C) and (3) make sense only if a tardily filed claim can be an allowed claim. The same provisions of the Code and Rules control the filing and allowance of proofs of claim in Chapter 7 and Chapter 13 cases—principally §§ 501 and 502 of the Code and Bankruptcy Rules 3002 and 3004. If disallowance is the consequence of the tardy filing of a proof of claim in a Chapter 13 case, then the same must be said of the tardy filing of proofs of claim in a Chapter 7 case. If a tardily filed claim in a Chapter 7 case is disallowed, then what sense can be made of the priority for distribution with respect to tardily filed claims in § 726(a)(2)(C) and (3)? More reasonably, Congress contemplated that tardily filed claims would be allowable claims but would suffer the lowered priorities in a Chapter 7 case described in § 726(a)(2) and (3).
 

 

 

 

 5.
In a Chapter 13 case, to accomplish confirmation the plan must satisfy the best-interests-of-creditors test in § 1325(a)(4).22 That test requires that the property to be distributed on account of each allowed unsecured claim must be not less than the amount that would be paid on such claim if the estate were liquidated under Chapter 7 on the effective date of the plan.23 In a liquidation under Chapter 7, the holder of a tardily filed claim would have distribution rights under § 726(a)(2) and (3). If tardily filed claim holders cannot have allowed claims in a Chapter 13 case, then either a statutory inconsistency is produced or it must be that Congress intended “allowed unsecured claim” to have a different meaning in § 726(a) than in § 1325(a)(4)—an intent nowhere evident in the Code. The rights of unsecured creditors upon liquidation under Chapter 7 are consistent with the rights of those same creditors at confirmation of a Chapter 13 plan under § 1325(a)(4) if a tardily filed claim is allowable to the same extent in a case under either chapter. If in a Chapter 7 case tardily filed claim holders would not be entitled to distributions under § 726, then § 1325(a)(4) would not preclude the Chapter 13 plan from providing that tardily filed claims receive no distributions. If tardily filed claims would be entitled to distributions in a Chapter 7 case, then § 1325(a)(4) would prohibit confirmation of any plan that fails to protect the same rights of tardily filed claim holders through the confirmed plan.24
 

 

 

[9]

The overwhelming weight of decisions supported the view that untimely filed proofs of claim were disallowed in Chapter 13 cases filed before the effective date of the 1994 amendments. As the late-filed claims cases after Hausladen worked their ways into the appellate courts, few unreversed opinions remained to support Hausladen. However, there were pending Chapter 13 cases that were filed before October 22, 1994, and most courts of appeals had not resolved the allowance of untimely filed claims in those Chapter 13 cases.25

[10]

In Chapter 13 cases filed before October 22, 1994, debtors and creditors could position themselves to some advantage with respect to the allowance or disallowance of untimely filed proofs of claim. Any claim holder that failed to file a proof of claim before expiration of the timeliness deadline in former Bankruptcy Rule 3002(c) could file an untimely claim that would be allowed and paid absent objection. Debtors could provide a specific treatment for tardily filed proofs of claim in the plan or by modification. 11 U.S.C. § 1322(b)(10) permits a Chapter 13 debtor to include in the plan “any other appropriate provision not inconsistent with this title.” There was nothing in the pre-1994 Code to prohibit a Chapter 13 debtor from including in the plan a provision defining the rights of tardily filing claim holders. The plan might have provided that tardily filed claims would be paid after timely filed claims.26 The plan might have separately classified tardily filed claims for treatment different from other claims, possibly including a lower percentage of repayment.27 The debtor could propose no payment at all on account of tardily filed claims. A Chapter 13 debtor was best positioned to argue that confirmation affects the validity or extent of liens of secured claim holders that failed or refused to timely file proofs of claim if the confirmed plan provided for disallowance of untimely filed proofs of claim.28

[11]

The effect on liens of the failure to timely file a proof of claim may turn on the question whether untimeliness was a ground for disallowance in cases filed before October 22, 1994. If untimeliness was a ground for disallowing a claim, then lienholders whose claims were disallowed for tardiness faced jeopardy under § 506(d)—their liens might be voided because their claims were disallowed for a reason other than the failure of any entity to file a proof of claim.29 If untimeliness was not a ground for disallowing a claim in a pre-1994 Chapter 13 case, then lienholders whose claims were tardy might forfeit distributions under the plan but would retain their liens, would escape jeopardy under § 506(d) and might have arguments for other relief.30


 

1  See 11 U.S.C. § 726(a)(2), (3).

 

2  See 11 U.S.C. § 502(b) (prior to 1994 amendments).

 

3  See, e.g., Street v. Lawson, 55 B.R. 763 (B.A.P. 9th Cir. 1985) (Bankruptcy Rule 3002(c) is an absolute bar to claims filed after 90 days after the § 341 meeting.); In re Tomlan, 102 B.R. 790 (E.D. Wash. 1989) (Failure to file timely proof of claim is fatal to tax claim.); Richards v. United States, 50 B.R. 339 (E.D. Tenn. 1985) (Tax penalty claim otherwise entitled to priority was not allowed and discharged because not timely filed.); In re Weissman, 126 B.R. 889 (Bankr. N.D. Ill. 1991) (Untimely filing of claim requires disallowance of the claim under Bankruptcy Rule 3002.); In re Wells, 125 B.R. 297 (Bankr. D. Colo. 1991) (No provision of Bankruptcy Rule 3002(c) allows the court to extend the 90-day period for filing of proof of a secured claim.); In re Scott, 119 B.R. 818 (Bankr. M.D. Ala. 1990); In re Glow, 111 B.R. 209 (Bankr. N.D. Ind. 1990); Workman v. United States, 108 B.R. 826 (Bankr. M.D. Ga. 1989) (Failure of IRS to file timely proof of its priority claim is fatal to IRS’s claim.); In re Chirillo, 84 B.R. 120 (Bankr N.D. Ill. 1988) (Bankruptcy Rule 3002(c) is an absolute bar to the filing of an unsecured claim after the 90 days expire.); In re Rothman, 76 B.R. 38 (Bankr. E.D.N.Y. 1987) (Prepetition taxes otherwise entitled to priority are discharged when IRS fails to file a timely proof of claim.); In re Matthews, 75 B.R. 379 (Bankr. E.D. Mo. 1987) (Allowance of late-filed claim denied.); In re Stern, 70 B.R. 472 (Bankr. E.D. Pa. 1987) (Bankruptcy court has no power to extend the bar date in Bankruptcy Rule 3002(c).); In re Bradshaw, 65 B.R. 556 (Bankr. M.D.N.C. 1986) (Undersecured claim holder’s failure to timely file proof of claim defeated creditor’s deficiency claim.); In re Goodwin, 58 B.R. 75 (Bankr. D. Me. 1986); Still v. Tennessee Dep’t of Revenue (In re Rogers), 57 B.R. 170 (Bankr. E.D. Tenn. 1986) (Timely filing of proof of claim is prerequisite to allowance of a secured claim in a Chapter 13 case.); In re Kennedy, 40 B.R. 558 (Bankr. N.D. Ala. 1984) (Bankruptcy Rule 3002(c) and Bankruptcy Rule 9006 prohibit enlargement of the 90-day period for filing proofs of claim.).

 

4  See, e.g., In re Weissman, 126 B.R. 889 (Bankr. N.D. Ill. 1991) (Untimely claim by ex-spouse is disallowed under Bankruptcy Rule 3002 for purposes of dividend distribution.); In re Wells, 125 B.R. 297 (Bankr. D. Colo. 1991) (Sections 1325, 502(a) and 506 create the requirement that if a secured claim holder is to participate in distributions from a confirmed plan, the secured claim holder must timely file a proof of claim.); In re Van Hierden, 87 B.R. 563 (Bankr. E.D. Wis. 1988) (Undersecured creditor that does not timely file a proof of claim can recover only from its collateral and not from plan payments.).

 

5  See, e.g., Smoot v. Southtrust Mobile Servs., Inc. (In re Smoot), 134 B.R. 960 (Bankr. N.D. Ala. 1991) (Claim holder with unperfected security interest that intentionally did not file a proof of claim in misguided reliance on Southtrust Bank of Ala. v. Thomas (In re Thomas), 883 F.2d 991 (11th Cir. 1989), is bound by the confirmed plan and is not entitled to any distributions. Because the secured claim would not be allowable for a reason other than the failure to file a proof of claim—it would not be allowable because it was unperfected—the creditor’s lien is voidable under § 506(d).).

    The voiding of liens under 11 U.S.C. § 506(d) in Chapter 13 cases is somewhat uncertain after the Supreme Court’s decision in Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992). In Dewsnup, the Supreme Court precluded the use of § 506(d) in a Chapter 7 case to strip down the lien of an undersecured claim holder. The opinion limits this holding to the Chapter 7 facts presented in Dewsnup. Dewsnup should not affect the use of § 506(d) in Chapter 13 cases; however, any debtor’s counsel contemplating the use of § 506(d) in a Chapter 13 case must anticipate an argument for extension of Dewsnup. See §§ 105.1 [ Valuation, Claim Splitting and Dewsnup ] § 76.1  Valuation, Claim Splitting and Dewsnup and 231.1 [ 11 U.S.C. § 1327(c): Free and Clear Effect on Liens ] § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens.

 

6  146 B.R. 557 (Bankr. D. Minn. 1992). Accord In re Friauf, 172 B.R. 273, 276 (Bankr. D. Minn. 1994) (Late-filed claim of IRS is allowable. “[T]hat the IRS’ claim was tardily filed is irrelevant for purposes of maintaining its priority.” Because IRS purposefully neglected to file its claim for four and one-half years, priority claim will be paid “in futuro” until the debtor otherwise completes payments under the plan. Because the debtor will complete payments under the plan before the late-filed priority claims are paid in full, the balance of the IRS’ claim will be discharged.); In re Buck, 172 B.R. 271 (Bankr. D. Minn. 1994); In re Bunn, 170 B.R. 670 (Bankr. D. Minn. 1994).

 

7  146 B.R. at 558–60 (emphasis added).

 

8  United States v. Waindel (In re Waindel), 65 F.3d 1307, 1309–10 (5th Cir. 1995) (Untimely filed claim for taxes, penalties and interest is allowable in a Chapter 13 case, is entitled to priority under § 507, but is not entitled to “first-tier distribution status” under § 726(a)(1). “[T]o the extent that Rule 3002(a) declares every untimely filed claim to be disallowed, the Rule impermissibly conflicts with the Code. . . . The late claim filed by the IRS for back taxes . . . is a priority unsecured claim under section 507(a)(7). . . . [W]e hold that the IRS’s tardily filed claim is not entitled to first-tier status as IRS hoped. The claim might be entitled to a distribution under § 726(a)(3) along with any other untimely allowed secured claims. . . . The IRS’s tardily filed claim is ‘allowed’ under 11 U.S.C. § 502, but it is not entitled to first-tier status under 11 U.S.C. § 726(a)(1).”). Accord In re Melton, 194 B.R. 418 (Bankr. E.D. Tex. 1996) (Citing In re Hausladen, 146 B.R. 557 (Bankr. D. Minn. 1992), in a case filed on October 5, 1994, “lateness is not a ground for disallowance under section 502 of the Code.” Court allows late-filed IRS claim notwithstanding that debtor timely filed a proof of claim for the IRS in an amount different from the amount of the claim filed by the IRS.).

 

9  Compare In re Nanes, 168 B.R. 715 (Bankr. D. Colo. 1994) (In re Babbin, 164 B.R. 157 (Bankr. D. Colo. 1994), correctly held that an untimely filed proof of an unsecured claim is not necessarily disallowed in a Chapter 13 case.), and In re Babbin, 164 B.R. 157 (Bankr. D. Colo. 1994) (On remand, court reaffirms prior holding that the untimely filing of an unsecured claim is not alone ground for disallowance.), with In re Rome, 162 B.R. 872, 876 (Bankr. D. Colo. 1993) (“This Court believes that timely filed proofs of claim for unsecured claims, pursuant to rule 3002(c) . . . [are] legally required, appropriate, and necessary in Chapter 13. This Court would respectfully disagree with the [In re Hausladen, 146 B.R. 557 (Bankr. D. Minn. 1992),] line of cases[.]”).

 

10  See Beltran v. Calmat Co. (In re Beltran), 177 B.R. 905 (B.A.P. 9th Cir. 1995) (Applying United States v. Towers (In re Pacific Atlantic Trading Co.), 33 F.3d 1064 (9th Cir. 1994), untimeliness alone is not a ground for the disallowance of a claim in a Chapter 13 case filed prior to the enactment of the Bankruptcy Reform Act of 1994.), rev’d, 81 F.3d 167 (9th Cir. 1996) (Applying IRS v. Osborne (In re Osborne), 76 F.3d 306 (9th Cir. 1996), tardily filed claim must be disallowed in Chapter 13 case, not merely given a lower priority.); In re Sullins, 161 B.R. 957 (Bankr. M.D. Tenn. 1993), rev’d by IRS v. Chavis (In re Chavis), 47 F.3d 818 (6th Cir. 1995); In re Dietz, 136 B.R. 459, 461 (Bankr. E.D. Mich. 1992) (In dicta, “there is no provision in the Bankruptcy Code which explicitly requires the ‘disallowance’ of late claims.”), rev’d by IRS v. Chavis (In re Chavis), 47 F.3d 818 (6th Cir. 1995).

 

11  See United States v. Vecchio (In re Vecchio), 20 F.3d 555 (2d Cir. 1994) (Priority claims in a Chapter 7 case need not be timely filed to be allowed.); United States v. Towers (In re Pacific Atlantic Trading Co.), 33 F.3d 1064 (9th Cir. 1994) (Priority tax claim in a Chapter 7 case is not barred though untimely filed.). But see United States v. Osborne (In re Osborne), 76 F.3d 306 (9th Cir. 1996) (Distinguishing United States v. Towers (In re Pacific Atlantic Trading Co.), 33 F.3d 1064 (9th Cir. 1994), tax claim filed in a Chapter 13 case after the time period in Bankruptcy Rule 3002(c) is disallowed and dischargeable.).

 

12  47 F.3d 818 (6th Cir. 1995).

 

13  IRS v. Chavis (In re Chavis), 47 F.3d 818, 823–24 (6th Cir. 1995) (footnotes omitted). Accord United States v. Osborne (In re Osborne), 76 F.3d 306, 310–11 (9th Cir. 1996) (Following Ledlin v. United States (In re Tomlan), 102 B.R. 790 (E.D. Wash. 1989), aff’d per curiam, 907 F.2d 114 (9th Cir. 1990), and distinguishing United States v. Towers (In re Pacific Atlantic Trading Co.), 33 F.3d 1064 (9th Cir. 1994), tax claim filed after the time period in Bankruptcy Rule 3002(c) is disallowed and dischargeable. “[W]e perceive that the ruling case law of this court, unless and until changed by a court in banc, dictates that in a Chapter 13 reorganization, an IRS priority claim that the bankruptcy court disallows as untimely is also dischargeable under the Bankruptcy Code. . . . [W]e emphasize the substantial difference in the considerations relevant to Chapter 13 and Chapter 7 cases. . . . Treatment of creditors’ claims in Chapter 7 is . . . automatically provided for under Section 726. . . . [E]ven tardy claims must be paid before any distribution to the debtor may be made. . . . In stark contrast, a Chapter 13 debtor retains the assets of the estate in exchange for an agreement to make periodic payments to the creditors. The payments to the creditors must equal or exceed the amount that the creditors would receive under Chapter 7. 11 U.S.C. § 1325(a)(4). The debtor thus has an interest in whatever is ultimately left over, after all claims have been paid. Accordingly, if late-filed claims are not barred in Chapter 13 actions, it would not be possible to determine with finality whether a Chapter 13 plan satisfies this standard. . . . [A]ll unsecured creditors seeking payment under a Chapter 13 plan must file their claims on a timely basis so that the efficacy of the plan can be determined in light of the debtor’s assets, debts and foreseeable earnings. . . . Of course, the Bankruptcy Reform Act of 1994 now codifies the In re Tomlan rule for both Chapter 7 and Chapter 13 cases.”).

 

14  See Gullatt v. United States (In re Gullatt), 169 B.R. 385 (M.D. Tenn. 1994); In re Babbin, 160 B.R. 848 (D. Colo. 1993); In re Carrillo, 215 B.R. 212 (Bankr. N.D. Okla. 1997); In re Tucker, 174 B.R. 732 (Bankr. N.D. Ill. 1994); In re Schaffer, 173 B.R. 393 (Bankr. N.D. Ill. 1994); In re Friesenhahn, 169 B.R. 615 (Bankr. W.D. Tex. 1994); Grubb v. Pittsburgh Nat’l Bank (In re Grubb), 169 B.R. 341 (Bankr. W.D. Pa. 1994); In re Jones, 164 B.R. 543 (Bankr. N.D. Tex. 1994); In re Rome, 162 B.R. 872 (Bankr. D. Colo. 1993); In re Leightner, 161 B.R. 60 (Bankr. D. Or. 1993); In re Chavis, 160 B.R. 804 (Bankr. S.D. Ohio 1993), aff’d, 47 F.3d 818 (6th Cir. 1995); In re Stoiber, 160 B.R. 307 (Bankr. N.D. Ohio 1993); In re Keck, 160 B.R. 112 (Bankr. N.D. Ind. 1993); In re Anderson, 159 B.R. 830 (Bankr. N.D. Ill. 1993); In re Messics, 159 B.R. 803 (Bankr. N.D. Ohio 1993); In re Crooker, 159 B.R. 790 (Bankr. E.D. Ky. 1993); In re Osborne, 159 B.R. 570 (Bankr. C.D. Cal. 1993); In re Turner, 157 B.R. 904 (Bankr. N.D. Ala. 1993); In re Johnson, 156 B.R. 557 (Bankr. N.D. Ill. 1993); In re Zimmerman, 156 B.R. 192 (Bankr. W.D. Mich. 1993); In re Bailey, 151 B.R. 28 (Bankr. N.D.N.Y. 1993).

 

15  156 B.R. 192 (Bankr. W.D. Mich. 1993).

 

16  156 B.R. at 197–99.

 

17  Section 57n of the former Act, 11 U.S.C. § 93n (repealed), provided in part, “Claims which are not filed within six months after the first date set for the first meeting of creditors shall not be allowed.”

 

18  But see IRS v. Chavis (In re Chavis), 47 F.3d 818, 824 (6th Cir. 1995) (“Because § 213 of the Bankruptcy Reform Act of 1994 reveals that Congress now expects unsecured creditors’ claims to be timely filed, the bankruptcy court’s reliance on Rule 3002 (prior to the Bankruptcy Reform Act’s effective date) was proper.”).

 

19  11 U.S.C. § 501(b), (c).

 

20  11 U.S.C. § 506(d).

 

21  11 U.S.C. § 502(a) provides, “A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless . . . .”

 

22  See discussion of best-interests-of-creditors test beginning at § 90.1  In General: Plan Payments vs. Hypothetical Liquidation.

 

23  See 11 U.S.C. § 1325(a)(4).

 

24  See § 160.1 [ In General: Plan Payments vs. Hypothetical Liquidation ] § 90.1  In General: Plan Payments vs. Hypothetical Liquidation.

 

25  See United States v. Osborne (In re Osborne), 76 F.3d 306 (9th Cir. 1996); United States v. Waindel (In re Waindel), 65 F.3d 1307 (5th Cir. 1995); IRS v. Chavis (In re Chavis), 47 F.3d 818 (6th Cir. 1995).

 

26  See, e.g., In re Collins, 33 B.R. 203 (Bankr. E.D.N.C. 1983) (Late-filed, unsecured claim allowed, but payment deferred until after payment of all other claims.).

 

27  See §§ 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination and 158.8 [ Miscellaneous Classes of Unsecured Claims ] § 89.9  Miscellaneous Classes of Unsecured Claims.

 

28  See discussion beginning at § 120.1  11 U.S.C. § 1327: Overview and § 162.3  On Liens.

 

29  See 11 U.S.C. § 506(d).

 

30  See § 247.1 [ Effect of Failure to File Proof of Claim on Postconfirmation Relief from the Stay ] § 124.7  Effect of Failure to File Proof of Claim on Postconfirmation Relief from the Stay. See, e.g., In re Lee, 182 B.R. 354 (Bankr. S.D. Ga. 1995) (Secured creditor with notice of bankruptcy that fails to file a proof of claim is bound by confirmation to accept no payment in full satisfaction of the debtor’s personal liability; however, that secured creditor’s in rem rights against its collateral survive confirmation and the bank may protect its security interest after confirmation by relief from the stay.). Compare In re Schaffer, 173 B.R. 393, 395 (Bankr. N.D. Ill. 1994) (Secured claim holder must file proof of claim within the 90-day limitation fixed by Bankruptcy Rule 3002, else the claim is disallowed. “If the admittedly late filed claim is disallowed, the Debtor may be able to retain the collateral, a 1993 Nissan Truck, throughout the administration of the case and Bank One will have to await the closing of the case before pursuing its remedies. . . . Or, of course, Bank One could move to vacate the stay for cause. Cause would not likely flow from an omission (the late filing) by the party seeking relief from the stay.”). See also In re Macias, 195 B.R. 659, 662 n.5, 663 (Bankr. W.D. Tex. 1996) (In a case filed after the effective date of new § 502(b)(9), “[i]f a secured claim is untimely filed, the trustee is entitled (perhaps even obligated) to object to its filing as untimely. Such disallowed claims will not be entitled to any distribution under the plan, nor will the creditor’s failure to timely file permit the debtor [sic] to later argue a lack of adequate protection.” In a note, “a secured creditor cannot simply absent itself from the bankruptcy process in chapter 13, then hope to obtain easy relief from the automatic stay after confirmation. Such a creditor could hardly maintain that cause existed for relief from stay where the debtor had made provision for the creditor in the plan and only the creditor’s refusal to file a claim prevented it from receiving the adequate protection that had been offered.”).