In re Dumain

• Decision Date: 08 May 2013
• Docket Number: No. 11–37183 (cgm).,11–37183 (cgm).
• Citation: 492 B.R. 140
• Parties: In re Catherine M. DUMAIN, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of New York

492 B.R. 140

In re Catherine M. DUMAIN, Debtor.

No. 11–37183 (cgm).

United States Bankruptcy Court,

S.D. New York.

May 8, 2013.

Edward Quilice, Esq., Simon Haysom LLC, Goshen, NY, for Debtor.

Eric S. Sheidlower, Esq., Rosicki, Rosicki & Associates, P.C., Plainview, NY, for Bank of America, N.A.

MEMORANDUM DECISION DISALLOWING CLAIM AS LATE–FILED

CECELIA G. MORRIS, Chief Judge.

Debtor objects to the secured claim of Bank of America, N.A., alleging that the claim should be disallowed as late-filed. The Court holds that the Creditor was required to comply with the claims bar date ¹ imposed by Federal Rule of Bankruptcy Procedure 3002(c) and disallows the claim for failure to do so.

Jurisdiction

This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a) and the Amended Standing Order of Reference signed by Chief Judge Loretta A. Preska dated January 31, 2012. This is a “core proceeding” under 28 U.S.C. § 157(b)(2)(A) (matters concerning the administration of the estate).

Background

The Debtor objects to claim number 12–1, a secured claim filed by Bank of America, N.A. (“Creditor”). Dr's Obj. 1, ECF No. 57. Debtor asserts that the claim should be disallowed as a consequence of Creditor's failure to file its claim prior to the claims bar date. Id. Creditor's proof of claim was filed on April 19, 2012 in the amount of $357,751.50, and included mortgage arrears of $4,093.45. Id. The first section 341 meeting of creditors was scheduled for August 24, 2011. Notice of 341(a) 1, ECF No. 7. The claims bar date was November 22, 2011 pursuant to Bankruptcy Rule 3002(c),² which states that “[i]n a chapter 7 liquidation, chapter 12 family farmer's debt adjustment, or chapter 13 individual's debt adjustment case, a proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meeting of creditors called under § 341(a) of the Code....” Debtor argues that the claim should be disallowed pursuant to section 502(b)(9),³ which provides for the disallowance of untimely claims.

Creditor opposes the objection, arguing that secured creditors need not file proofs of claim in chapter 13 cases pursuant to Bankruptcy Rule 3002(a). Cr's Opposition 2, ECF No. 59. Bankruptcy Rule 3002(a) states that “[a]n unsecured creditor or an equity holder must file a proof of claim or interest for the claim to be allowed except as provided in Rules 1019(3), 3003, 3004, and 3005.” Id. Creditor argues that Bankruptcy Rule 3002(a) only mentions unsecured creditors and equity holders; therefore, secured creditors need not file proofs of claim in chapter 13 cases. Id. Creditor also argues that the omission of secured creditors from Bankruptcy Rule 3002(a) means that secured creditors need not comply with the bar date imposed by Bankruptcy Rule 3002(c). Id.

Creditor argues that disallowance of the largest secured claim will defeat the rehabilitative purposes of chapter 13. Cr's Opposition 3, ECF No. 59. Creditor points out that its lien will survive the bankruptcy whether the secured claim is allowed or not. Id. Creditor believes it would be at odds with the purpose of chapter 13 to leave the Debtor with a large unresolved debt upon completion of the case. Id.

In the alternative, Creditor argues that the Debtor acquiesced to the existence of the claim by listing it in her schedules and chapter 13 plan. Cr's Opp. 4, ECF No. 59. Debtor has filed three proposed plans in this case. The first was filed contemporaneously with the petition on July 29, 2011 and did not list any prepetition debt owed to Creditor. Plan 3, ECF No. 4. An amended plan was filed July 17, 2012, and proposed to treat prepetition arrears to Creditor in the amount of $4,093.45. Amend. Plan 3, ECF No. 35. A second amended plan was filed on September 27, 2012 and did not list any prepetition debt to Creditor. Sec. Amend. Plan 3, ECF No. 42.

Discussion

I. The Creditor must obtain an allowed claim to receive distributions from the chapter 13 plan.

Creditor argues that “[i]n a chapter 13 case, a proof of claim need not be filed by a creditor which is asserting a secured claim.” Cr's Opp. 2, ECF No. 59. Creditorcites to Bankruptcy Rule 3002(a) in support of its argument, which states:

(a) Necessity for Filing. An unsecured creditor or an equity security holder must file a proof of claim or interest for the claim or interest to be allowed, except as provided in Rules 1019(3), 3003, 3004, and 3005.

Fed. R. Bankr.P. 3002(a). Bankruptcy Rule 3002(a) mentions only unsecured creditors and equity holders, not secured creditors. On its face, Bankruptcy Rule 3002(a) seems to suggest that secured creditors need not file proofs of claim. This reading of Bankruptcy Rule 3002(a) is inconsistent with sections 501, 502, 1326(c), and with Bankruptcy Rule 3021. In re Hogan, 346 B.R. 715, 719 (Bankr.N.D.Tex.2006).

Section 501 provides that “[a] creditor or an indenture trustee may file a proof of claim.” Section 502 states that “[a] claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest ... objects.” Therefore, a proof of claim creates a claim that is presumptively allowed unless a party in interest objects.

Section 1326(c) requires the chapter 13 trustee to make plan distributions to creditors under the plan. The trustee can only make those distributions on account of allowed claims. Fed. R. Bankr.P. 3021 (“after a plan is confirmed, distribution shall be made to creditors whose clams have been allowed.....”).

Combined, these provisions indicate that the creditor must file a proof of claim to be entitled to plan distributions. Hogan, 346 B.R. at 719. Distributions are made to creditors who hold allowed claims under Bankruptcy Rule 3021, and the filing of a proof of claim initiates the allowance process under sections 501 and 502. Id. “In sum, if a creditor elects not to file a claim, then it also elects not to be paid under the plan.” Id. at 720 (citing In re Macias, 195 B.R. 659, 660–61 (Bankr.W.D.Tex.1996); In re Baldridge, 232 B.R. 394, 396 (Bankr.N.D.Ind.1999)); see also In re Minbatiwalla, 424 B.R. 104, 118 n. 8 (Bankr.S.D.N.Y.2010) (“[I]f the secured creditor wants to receive payments under a confirmed plan, the creditor must file a proof of claim.”).

This does not mean that Creditor is entirely incorrect in arguing that it need not file a proof of claim. “As a general rule, a secured creditor in a chapter 13 case is not required to file a proof of claim [and] may choose to ignore the bankruptcy proceeding and look to its lien for satisfaction of the debt.” Hogan, 346 B.R. at 719 n. 7 (citations omitted). It is a “well-established principle of bankruptcy law that liens pass through bankruptcy proceedings unaffected.” Federal Deposit Insurance Corporation v. Union Entities (In re Be–Mac Transport Company, Inc.), 83 F.3d 1020, 1025 (8th Cir.1996) (citing Dewsnup v. Timm, 502 U.S. 410, 417, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992); Long v. Bullard, 117 U.S. 617, 620–21, 6 S.Ct. 917, 29 L.Ed. 1004 (1886)). Therefore, Creditor has the option to look to its lien for satisfaction as the sole means of satisfying the debt. To be entitled to distributions from the chapter 13 plan, Creditor needs an allowed claim.

II. The Creditor was required to comply with the deadline for filing claims imposed by Federal Rule of Bankruptcy Procedure 3002(c).

Having determined that Creditor was required to file a proof of claim to become entitled to distributions under the chapter 13 plan, the Court turns to the issue of timeliness. Bankruptcy Rule 3002(a) states:

(a) Necessity for Filing. An unsecured creditor or an equity security holder must file a proof of claim or interest for the claim or interest to be allowed, except as provided in Rules 1019(3), 3003, 3004, and 3005.

Bankruptcy Rule 3002(c) states:

(c) Time for Filing. In a chapter 7 liquidation, chapter 12 family farmer's debt adjustment, or chapter 13 individual's debt adjustment case, a proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meeting of creditors called under § 341(a) of the Code....

Fed. R. Bankr.P. 3002(a). Bankruptcy Rule 3002(c) then enumerates five exceptions that are not implicated here.

The fact that Bankruptcy Rule 3002(a) omits secured creditors creates an issue of interpretation as to whether Bankruptcy Rule 3002(c) applies to secured creditors. Courts interpreting these provisions fall into three camps.

A. The three approaches.

i. The first approach: the secured creditor need not comply with any bar date.

Some courts reason that the omission of secured creditors from Bankruptcy Rule 3002(a) means that they should also be entirely omitted from Bankruptcy Rule 3002(c). These courts apply no bar date to secured claimants in chapter 13. In In re Mehl, 2005 WL 2806676, at *2 (Bankr.C.D.Ill. Oct. 25, 2005), the court noted that Bankruptcy Rule 3002(a) omits secured creditors, and that no other reference is made to a bar date for secured creditors in the Bankruptcy Code or Bankruptcy Rules. Id. The court found that a secured creditor must file a proof of claim in order to be paid through the chapter 13 plan, but rather than creating “a deadline out of whole cloth” by imposing a “firm deadline where none exists by statute or rule,” the court imposed an open duty on the secured creditor to file the proof of claim in order to receive plan payments. Id. at *2–3. The court reasoned that “[t]he economic incentive that a secured creditor has to file its own proof of claim should go a long way toward eliminating this problem.” Id. at *4.

The court also found that this interpretation was consistent with section 502(b)(9), which provides that a claim to which an objection is made should be allowed unless “proof of such claim is not timely filed.” Id. at *3. The court declined to decide whether a secured claim could be “untimely” if filed so late in the case that plan...