By Bradley R. Hightower, Christian & Small Partner
What do you say when you realize that you filed your proof of claim after the bar date? Probably something ugly. As a creditor’s attorney, if you find yourself beyond the bar date without a proof of claim on file, you have a limited number of options available.
This blog post picks up shortly after that point to suggest some things to say to the bankruptcy court. If you make the arguments set out below and have a good set of facts, the judge may allow you to file a proof of claim after the bar date.
There are four arguments you can make to the bankruptcy court to get your claim allowed. The first two are generally applicable to all chapters of bankruptcy, while the last two are only applicable to specific ones. The four arguments are:
- I filed a timely “informal” proof of claim.
- I never received notice of the bar date.
- I filed a late claim in a Chapter 11 case, but I have an excuse.
- I filed a late claim in a Chapter 7 case, but it should be allowed and paid as a tardily filed claim.
Here’s a more in depth look at each of these arguments:
I FILED A TIMELY “INFORMAL” PROOF OF CLAIM.
The bankruptcy rules define a proof of claim as “a written statement setting forth a creditor’s claim.” A creditor (or the debtor on the creditor’s behalf) must file a proof of claim to participate in the distribution of the debtor’s bankruptcy estate to unsecured creditors in a Chapter 7, 12 or 13 case. In a Chapter 9 or 11 case, the creditor must file a proof of claim if its claim is listed as disputed, contingent, or unliquidated in the debtor’s schedules.
The time during which a creditor must file is determined by the type of bankruptcy proceeding chosen by the debtor. Generally, creditors must file a proof of claim no later than 90 days after the first meeting of creditors in a Chapter 7, 12 or 13 case and within the time fixed by a court’s local rules in a Chapter 9 or 11 case. When these requirements are not met, the question arises whether a creditor that gave some written notice of its claim to the debtor and/or the court can rely on that notice as an “informal” proof of claim.
The Bankruptcy Code and Rules do not contemplate the filing of an informal proof of claim because it is a judicially created doctrine. Nevertheless, the Eleventh Circuit Court of Appeals has held that not every document filed prior to the bar date will serve as an informal proof of claim.
I NEVER RECEIVED NOTICE OF THE BAR DATE
The Bankruptcy Code provides that all creditors must receive 21 days’ notice of, among other things, the meeting of creditors (which establishes the 90-day period for filing claims in a Chapter 7, 12 or 13 case) and the time for filing claims in a Chapter 9 or 11 case, but it does not define the term “notice.”
If you or your client know about a bankruptcy filing, do not sit around and wait for the formal notice of the bar date to arrive in the mail. If the debtor files a Chapter 7, 12 or 13 case, the debtor is required to provide you with notice of the meeting of creditors but not necessarily the bar date (your knowledge of the filing alone may be enough to discharge your claims). Therefore, you should take the date of the meeting of creditors and add 90 days to it to determine the bar date.
If the debtor files a Chapter 9 or 11 case, you can relax a little because the debtor is required to provide you with formal notice of the bar date even if you have knowledge of the filing. If all this seems a little confusing, just remember not to sit and wait for the formal notice to arrive if you have knowledge of the filing. Go ahead and file your proof of claim.
I FILED A LATE CLAIM IN A CHAPTER 11 CASE, BUT I HAVE AN EXCUSE.
The Bankruptcy Rules permit late filed claims in a Chapter 9 or 11 case if the creditor’s failure to timely file the claim “was the result of excusable neglect.”
You may find the “excusable neglect” doctrine appealing if you filed a late proof of claim in a Chapter 9 or 11 case. It seems like a great way to get your claim in, even though it’s late. But before you file your motion, consider this – motions to allow late filed claims read like confessions that should be sent directly to your malpractice carrier. For the motion to be granted, you have to plead and prove your own negligence (that’s the neglect part) and hope that it was excusable. Otherwise, you know that motion will be Plaintiff’s Exhibit No. 1 in the malpractice action against you.
I FILED A LATE CLAIM IN A CHAPTER 7 CASE, BUT IT SHOULD BE ALLOWED AND PAID AS A TARDILY FILED CLAIM.
Similar to the “excusable neglect” doctrine applicable to Chapter 9 and 11 cases, filing your claim late is not desirable if there are other arguments you can make first. Although your late filed claim will be allowed by the bankruptcy court, there is no assurance, even if funds are available in a debtor’s bankruptcy estate, that you will actually receive any distribution because your claim will only be paid if money is left over after paying priority creditors (administrative expenses, wages, alimony, taxes, etc.) and creditors who timely filed their claims.
Many creditor’s attorneys do not know what to say when they realize that they filed their proof of claim after the bar date. Understandably, the thought of making an argument to save your late filed claim from being excluded from the distribution of the debtor’s bankruptcy estate is far from desirable. Even if you win, your formal amended proof of claim may be paid cents on the dollar. Nonetheless, if you make the arguments set out in this article, in the suggested order, you may end up with a formal amended proof of claim that receives the same treatment as the timely filed claims of other creditors. That is a very good result, considering the equitable policies of the Bankruptcy Code.