In re Stern
| Decision Date | 25 February 1987 |
| Docket Number | Bankruptcy No. 85-05550G. |
| Parties | In re Arnold STERN, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Edward Cohen, Philadelphia, Pa., for the movant, Kenneth J. Neufeld.
Harold N. Kaplan, Philadelphia, Pa. for the debtor, Arnold Stern.
James J. O'Connell, Philadelphia, Pa., trustee.
Kenneth J. Neufeld has filed a motion to revoke the order of discharge entered in this case, so as to permit him to file a proof of claim or amend an "informal" proof of claim.1 For the reasons set forth below, this motion will be denied.
The relevant facts surrounding this dispute are uncontested.2
On December 27, 1985, the debtor filed a voluntary petition in bankruptcy under chapter 13. Shortly thereafter, the debtor filed his chapter 13 statement and plan. Only two creditors were listed — the movant, and the debtor's mortgage company. Movant's claim was listed as unsecured because the movant held a judgment lien which the debtor planned to avoid. The plan provided only for payment of unsecured claims, as the debtor's mortgage was current, with payments to the trustee set in the amount of $426.00 per month for sixty months.
On January 14, 1986, the debtor filed an amendment to his schedules and added three additional unsecured creditors. On January 28, 1986, notice was sent to all creditors, the debtor, and parties in interest that a creditors' meeting was scheduled for February 19, 1986, that May 20, 1986 was the last date for filing proofs of claim, and that a confirmation hearing on the plan would be held on May 27, 1986. No creditor filed any proofs of claim and the debtor's plan was confirmed without objection on May 27, 1986.
On June 2, 1986, (subsequent to confirmation), the debtor filed both a motion to avoid Mr. Neufeld's judgment lien under 11 U.S.C. § 522(f)(1) plus a complaint to determine that the movant held an unsecured claim because this creditor had failed to properly perfect his contractual security interest. The debtor obtained the relief he sought both from his motion and from his complaint by default, as the movant filed no responsive pleading to either matter.
After the debtor had obtained a judicial determination that Mr. Neufeld held no valid lien against property of the estate, the debtor petitioned for and received an order of discharge on August 5, 1986. Since no creditor had filed a proof of claim at any time during the case, the standing chapter 13 trustee returned to the debtor all monthly payments the trustee had received (after subtracting for administrative expenses). Shortly thereafter this instant motion was filed.
In seeking to revoke the debtor's discharge, the movant argues that his claim in the amount of $37,605.78 should have been allowed for three reasons: first, a letter sent by the movant's counsel to the debtor's counsel "was tantamount to filing a proof of claim"; second, the debtor acknowledged the movant's unsecured claim by the filing of a complaint; and third, the movant urges that excusable neglect is present permitting the late filing of a proof. (Motion ¶ 9.) The debtor counters by arguing that no proof of claim was ever filed by the movant and that I have no authority to extend the bar date.
Section 1328(e) of the Bankruptcy Code permits the revocation of an order of discharge in a chapter 13 case only when:
11 U.S.C. § 1328(e).
Obviously, fraud is the linchpin which empowers a bankruptcy court to grant a revocation.3 See In re Levine, 8 B.R. 281, 284 (N.D.Ill.1980); 5 Collier on Bankruptcy ¶ 1328.01 (15th ed. 1986). The movant's implicit argument is that a debtor fraudulently obtains a discharge under § 1328(a) if he has failed to complete all required plan payments. Whether such conduct amounts to fraud need not be addressed here unless this debtor failed to complete his obligations under the confirmed plan. Since I conclude that the failure of any creditor to file a timely proof of claim terminated the debtor's obligation to make payments under his plan, the debtor completed his obligations under the plan and committed no fraud.
The debtor's plan, which was confirmed without objection, obligated the debtor to pay a portion of allowed unsecured claims. In order for an unsecured creditor to have an allowed claim in a chapter 13 case, he must file a proof of claim. 11 U.S.C. §§ 501, 502; Bankr.Rule 3002. After confirmation, "distribution shall be made to creditors whose claims have been allowed." Bankr.Rule 3021; accord In re Key, 64 B.R. 786 (Bankr.M.D.Tenn.1986). Once the debtor's plan was confirmed, its terms were binding upon the debtor and all creditors. 11 U.S.C. § 1327(a); accord Matter of Gregory, 705 F.2d 1118 (9th Cir. 1983). And, once the debtor has completed his plan payments, he is entitled to a discharge of all debts "provided for by the plan or disallowed under section 502" (with certain exceptions not relevant here). 11 U.S.C. § 1328(a).
In the instant case, no creditor filed a proof of claim. Therefore, the creditors' inaction permitted the debtor to complete the terms of his plan without making any plan payments for there were no creditors to whom the trustee was to make distribution. Bankr.Rule 3021.
The movant seeks to avoid this result by arguing that he did file a timely proof of claim, albeit an "informal" one. He maintains that a letter sent by the creditor's attorney to the debtor's attorney, plus the litigation brought against the movant by the debtor constitute a proof of claim. Alternatively, he seeks leave to file a late proof. See In re Key (no discharge will be entered until all claims, including an informal proof of claim, are paid).
The concept of requiring creditors to file proofs of claim within a certain period of time (the "bar date") stems from the Bankruptcy Act of 1898. Prior to that time, there was no fixed time period for filing claims. In order to facilitate the prompt administration of the bankrupt's (now the debtor's) estate, a one year limitation period was set which was later reduced to six months by the Chandler Act of 1938 (former § 57n), 11 U.S.C. § 93n (repealed 1978)), and which was further reduced to three months by Bankr.Rule 3002(c). See In re Pigott, 684 F.2d 239 (3d Cir.1982); In re Supernit, Inc., 186 F.2d 130 (3d Cir. 1950); In re Thurston, 52 B.R. 71 (D.Colo. 1983); 2 Remington on Bankruptcy § 867 (5th ed. 1956).
The movant urges that any failure to file a proof of claim was due to counsel's oversight and requests that I permit a late filing for this "excusable neglect." However, courts in this circuit have long held that I have no power to extend the bar date for equitable reasons.4E.g., In re Pigott; In re Supernit; In re Owens, 67 B.R. 418, 423 (Bankr.E.D.Pa.1986); In re Ryan, 54 B.R. 105 (Bankr.E.D.Pa.1985); In re Fleming Construction Corp. 53 B.R. 406 (Bankr.E.D.Pa.1985), aff'd, 63 B.R. 392 (E.D.Pa.1986); In re Telephone Communications of America, Inc., 49 B.R. 959 (Bankr.E.D.Pa.1985); accord, Hoos & Co. v. Dynamics Corp., 570 F.2d 433, 439 (2d Cir.1978):
Thus, however much we would like to permit the bankruptcy court to consider in a particular case, including this one, whether it would be "equitable" to permit late filing of a scheduled claim, to do so would put the bankruptcy courts in the unenviable position of indefinitely having to consider claims whenever some sort of excuse is asserted. Such a procedure would destroy the objective of finality which Congress obviously intended to promote.
A recent decision from the Third Circuit Court of Appeals, In re Crouthamel Potato Chip Co., 786 F.2d 141, 146 n. 7 (3d Cir.1986), may portend a slight loosening of the "strict" rule enunciated in earlier cases such as In re Supernit.5 Certainly there are other courts which have looked to former Bankr.Rule 906(b)(1), now Bankr.Rule 9006(b)(1), as permitting an enlargement of time for filing proofs of claim based upon "excusable neglect."6 See In re O.P.M. Leasing Services, Inc. 48 B.R. 824 (S.D.N.Y.1985). However, this phrase has been narrowly defined and is limited to those situations where the failure to act timely was due to circumstances beyond the creditor's control. In re South Atlantic Financial Corp., 767 F.2d 814, 817 (11th Cir.1985), cert. denied, ___ U.S. ___, 106 S.Ct. 1197, 89 L.Ed.2d 311 (1986); In re Benedict, 65 B.R. 95, 96 (Bankr.N.D.N.Y. 1986).
In this matter, though, the only reason given for the failure to file a proof of claim was due to counsel's oversight. Mr. Neufeld admits to receiving the requisite notices, including that of a bar date, but his counsel failed to apprise himself of the requirements of Rule 3002.7 Therefore even if I were to conclude that I had the authority to enlarge the time established in Rule 3002(c), I would decline to do so in this instance. Accord, In re Pigott, 684 F.2d at 244; In re South Atlantic Financial Corp., 767 F.2d at 819. Cf. Matter of Arkansas Co., Inc. 798 F.2d 645 (3d Cir. 1986) ().
Perhaps recognizing the limits upon my power to expand the deadlines established by Rule 3002(c), the movant alternatively argues that he had timely filed an informal proof of claim by virtue of a letter his counsel wrote to the debtor's counsel on January 6, 19868 and by virtue of the litigation brought against him by the debtor. Indeed, the creditor is correct that a writing, although not in the format prescribed by Official Form No. 19, and although not containing all the information required by Bankr.Rule 3001 may...
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