In Re David W. Falwell

• Decision Date: 04 December 2009
• Docket Number: No. 08-60495-LYN.,08-60495-LYN.
• Parties: In re David W. FALWELL and Amanda B. Falwell, Debtors.David W. Falwell and Amanda B. Falwell, Debtors,v.Roundup Funding LLC.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Virginia

434 B.R. 779

In re David W. FALWELL and Amanda B. Falwell, Debtors.David W. Falwell and Amanda B. Falwell, Debtors,v.Roundup Funding LLC.

No. 08-60495-LYN.

United States Bankruptcy Court,

W.D. Virginia,

Lynchburg Division.

Dec. 4, 2009.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Stephen E. Dunn, Esq., Lynchburg, VA, for the debtors.

Patrick J. McKenna, Esq., Glasser and Glasser, P.L.C., Norfolk, VA, for Roundup Funding LLC.

MEMORANDUM

WILLIAM E. ANDERSON, Bankruptcy Judge.

This matter comes before the Court on objections by David W. Falwell and Amanda B. Falwell (“the Debtors”) to two proofs of claim filed by Roundup Funding LLC (“Roundup”). The objections will be overruled.

Jurisdiction

This court has jurisdiction over these matters. 28 U.S.C. §§ 1334(a) & 157(a). This is a core proceeding. 28 U.S.C. § 157(b)(2)(A) & (B). Accordingly, this Court may render a final order. This memorandum shall constitute the Court's findings of fact and conclusions of law as directed by Fed.R.Civ.P. 52 which is made applicable in this contested matter by Fed.R.Bankr.P. 9014(c) and 7052.

Facts

On March 3, 2008, the Debtors filed the above-styled chapter 13 petition with the Clerk of the Bankruptcy Court. The Debtors scheduled an unsecured debt owing to creditor “Chase-Pier” in the amount of $254.00. The debt was not marked as disputed. Chase Bank USA, NA filed a proof of claim in the amount of $254.24 that indicated that the account was established to facilitate purchases at Pier 1 Imports. The proof of claim was supported by an account summary that did not contain any transaction listings other than “Purchases, Cash, Debits” in the amount of $29.00 and “Finance Charges” in the amount of $5.12. The claim was designated as claim no. 7 by the Clerk of the Court. The claim was transferred to Roundup.

The Debtors also scheduled an unsecured debt owing to creditor “Chase” in the amount of $9,837.00. The debt was not marked as disputed. The claim was transferred to Roundup. Roundup filed a proof of claim in the amount of $9,876.68. The claim as originally filed did not have any supporting documentation. Roundup subsequently filed an amended proof of claim that was supported by documentation including monthly billing statements dated May 3, 2007, through February 3, 2008. The claim was designated as claim no. 10 by the Clerk of the Court.

The Debtors filed an objection to each of the proofs of claim on the following grounds: “Creditor failed to file assignment of the claim. No supporting documentation. No evidence of contract, itemized statements, etc. Debt may [be] barred by the Statute of Limitations.” The Debtors subsequently withdrew their objections to the extent that they were based on the grounds that the creditors failed to file a notice of transfer of the claims.

Roundup requests an award of attorney's fees in the amount of $500.00 each for defending against the objections to claim.

Discussion

The Debtors object to Roundup's proofs of claim on the grounds that there is no supporting documentation, that there is no evidence of contract, that there are no itemized statements, and that the debt may be barred by the statute of limitations. The objections are essentially based on two grounds: (1) the proofs of claim are not supported by adequate documentation; and (2) the proofs of claim are barred by the statute of limitations.

I.

A creditor may file a proof of claim ¹. 11 U.S.C. § 501(a). A proof of claim is a written statement setting forth a creditor's claim. Fed.R.Bankr.P. 3001(a). When a claim is based on a writing, the original or a duplicate shall be filed with the proof of claim. Fed.R.Bankr.P. 3001(c). If the original has been lost or destroyed, a statement of the circumstances of the loss or destruction shall be filed with the claim. Id. Each proof of claim presented for filing must have attached any applicable security interest or other appropriate documentation evidencing the debt. Local Bankruptcy Rule 3001-1(c).

The burden is originally on the creditor to file the proof of claim. A claim, proof of which is filed under Section 501, is presumed to be prima facie valid and will be allowed unless a party in interest objects. 11 U.S.C. § 502(a). In order to be deemed prima facie valid, a proof of claim must be supported by documentation if required by Rule 3001(c).

The failure of a creditor to provide documentation merely serves to deprive the claim of its prima facie validity. See, e.g., In re Lasky, 364 B.R. 385, 387 (Bankr.C.D.Cal.2007). This conclusion represents the majority view in the reported decisions. See In re Andrews, 394 B.R. 384, 389 (Bankr.E.D.N.C.2008). There are no specific requirements for documentation for unsecured claims, other than the creditor must submit a writing if the debt is based on a writing.

If the proof of claim is not supported by the requisite documentation, it is not presumed to be prima facie valid. If the presumption does not arise, the debtor need only object to the claim pursuant to the applicable rules. In re Tran, 369 B.R. 312, 318 (S.D.Tex.2007). The objection, however, must be based on some good faith ground. An assertion that the proof of claim is not supported by documentation is not sufficient to support an objection to claim.

The objection based on the lack of documentation is not a sufficient basis to disallow the proof of claim. While the proof of claim form requires documentation, the failure to provide documentation does not mean that the debtors do not owe the money to the creditors.

In re Canlas, 08-10688-RGM, 2008 WL 4736350 (Bankr.E.D.Va.2008).

Rule 3001(c) does not provide the debtor with an independent basis for objecting to a proof of claim.

The grounds for the disallowance of a proof of claim are specifically listed in 11 U.S.C. § 502-not in the Bankruptcy Rules. Therefore, it is not enough for the Chapter 13 debtor to merely complain that the proof of claim filed by a creditor lacks sufficient documentation under the Bankruptcy Rules, the debtor must also assert a grounds for disallowance under § 502, as for example, by contesting the amount claimed to be owed.

In re Simms, 2007 WL 4468682, *2 (Bankr.N.D.W.Va.2007). Also see

In re Heath, 331 B.R. 424, 435 (9th Cir. BAP 2005) (“Noncompliance with Rule 3001(c) is not one of the statutory grounds for disallowance.”).

In In re Dove-Nation, 318 B.R. 147 (8th Cir. BAP 2004) the Eighth Circuit Bankruptcy Appellate Panel discuss the relationship between 11 U.S.C. § 502 and Fed.R.Bankr.P. 3001(c). The Court concluded:

Section 502 of the Bankruptcy Code governs the allowance and disallowance of claims filed against bankruptcy estates. Neither procedural rules nor instructional language on official forms overrides clear statutory language. Therefore, the [bankruptcy] court properly overruled the Debtor's objections to claims based solely on grounds not recognized by Section 502 of the Code.

Id., 318 B.R. at 153. An assertion that a proof of claim is not supported by documentation, standing alone, is never sufficient to support an objection to a proof of claim.

If the proof of claim is supported by the required documentation, the presumption of validity may be overcome by the objecting party only if it offers evidence of equally probative value in rebuttal. In re Holm, 931 F.2d 620, 623 (9th Cir.1991); In re Fullmer, 962 F.2d 1463, 1466 (10th Cir.1992); In re Allegheny International, Inc., 954 F.2d 167, 173-74 (3rd Cir.1992). If the debtor is to prevail, the evidence must be sufficient to demonstrate the existence of a true dispute and must have probative force equal to the contents of the claim. 9 Collier on Bankruptcy, “Proof of Claim”, ¶ 3001.09[2] (15th ed. rev.) (Citing In re Wells, 51 B.R. 563 (D.Colo. 1985) and In re Unimet Corp., 74 B.R. 156 (Bankr.N.D.Ohio 1987)). If the debtor offers such evidence, the burden shifts back to the creditor to produce evidence meeting the objections and establishing the claim. See, e.g., In re Knize, 210 B.R. 773, 779 (Bankr.N.D.Ill.1997).

If a claim is based on a writing, or is secured by property of the estate, the original or a duplicate shall be filed with the proof of claim. Fed.R.Bankr.P. 3001(c). The issue becomes “What writings or supporting documents are necessary to support a valid prima facie claim?” The purpose of the proof of claim and the required documentation is to permit the debtor to identify the claimant, the amount of the claim, and the character of the claim.

The purpose of the rules regarding claims is to require creditors to provide sufficient information so that a Debtor may identify the creditor and match the creditor and the amount of the claim with the claims scheduled by the Debtor. If a creditor fails to provide sufficient information regarding either the identity of the claimant or the amount of the claim, the Debtor may object to the claim. In the context of a claim filed by an assignee of a credit card creditor, the assignee must provide the contractual basis of its right to payment, and specific information on the Debtor's account (i.e. account number, social security number, and account balance). To require the assignee of credit card debt to produce voluminous account information for every claim imposes an unnecessary burden on creditors without conferring any necessary benefit on Debtors. The sale of credit card debt is commonplace in our economy, but in most cases, the fact that a sale has occurred should not prevent the Court from resolving claims in as speedy and inexpensive manner as possible.

In re Hughes, 313 B.R. 205, 212 (Bankr.E.D.Mich.2004). The documents, then, that are required to give a proof of claim prima facie validity are those that identify the claimant and the amount of the claim, and provide information sufficient to identify the basis for the claim (such as the account number). A writing, if required, must support the existence and amount of the claim and, if applicable, the priority or secured character of...