Late Secured Claim Disallowed Under 12/01/2017 Amended Rules

A secured claim filed after the bar date is disallowed when objected to in the EDKY, even if it is provided for in a confirmed chapter 13 plan.  A copy of the order is available here.

The debtor’s confirmed plan provided that the creditor’s claim, which is secured by the debtor’s car, would be paid as a “910 claim.”  The creditor filed its proof of claim after the deadline for filing claims (the “bar date”).  I objected to the claim as being untimely filed.

In the Eastern District of Kentucky, the court has a long history of sustaining objections to the allowance of late unsecured claims in chapter 13 cases, strictly interpreting 11 U.S.C. § 502(b)(9) and the Federal Rules of Bankruptcy Procedure.  (In a nutshell, section 502(b)(9) says that if an objection to a claim is filed, the court shall allow the claim “except to the extent that proof of such claim is not timely filed . . . .”).

When Rule 3002(a) was amended last year to require secured creditors to file proofs of claims, I could see no reason why a late secured claim should be treated any differently from a late unsecured claim, and I objected to the late secured claim.

With little discussion, the court sustained my objection and disallowed the late secured claim.  Some key points to remember:

• The deadline for filing a proof of claim is 70 days after the petition date.
• The bar date applies to secured creditors as well as to unsecured creditors.
• The bar date cannot be extended for equitable reasons.
• The bar date cannot be extended based on a creditor’s “excusable neglect” under Rule 9006(b)(1).
• If the creditor does not file a proof of claim by the bar date, the debtor may file a claim on behalf of the creditor within 30 days after the creditor’s bar date.
• If the debtor misses the deadline, it might be possible to get an extension due to the debtor’s (or debtor’s attorney’s) excusable neglect, but that issue was not before the court.
• Late claims are disallowed.

Several attorneys have asked me why I object to late secured claims the debtor wants to have paid through the plan, and it’s a legitimate question.  Here is my train of thought:  Congress enacted 11 U.S.C. § 502(b)(9) in 1994 for the express purpose of disallowing claims that are not timely filed.  I have a statutory duty to review claims and to object “if a purpose would be served.”  I believe a purpose is served when the Bankruptcy Code and Rules are followed and congressional intent is respected.  If Congress wanted to let secured creditors file late claims, the Code or the Rules could have been amended to so provide.

Some of my colleagues in other jurisdictions do not object to late secured claims because they believe it would be detrimental to the debtor’s successful reorganization.  I think debtors are still protected by Rule 3004, which lets debtors (and trustees) file claims on behalf of creditors.

Debtors’ attorneys should review claims right after the bar dates (remember, there is a different bar date for governmental creditors) and file proofs of claims on behalf of creditors who need to be paid in order for the debtor to have a successful chapter 13 case.

Although Rule 3004 also authorizes trustees to file claims on behalf of creditors, I do not intend to do so.

For other information on bar dates, read these earlier posts: New Bar Date After December 1, 2017 – Have You Remembered to File Claims? and December 1, 2017 Rule Changes: New Bar Date for Claims Filed by Secured and Unsecured Creditors.