In re Tucker

• Decision Date: 16 November 1994
• Docket Number: Bankruptcy No. 93 B 07270.
• Citation: 174 BR 732
• Parties: In re W. Randolph TUCKER, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

174 B.R. 732 (1994)

In re W. Randolph TUCKER, Debtor.

Bankruptcy No. 93 B 07270.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

November 16, 1994.

Bruce E. de'Medici, Chicago, IL, for American Express Centurion Bank, Local Counsel.

John D. Sheehan, Becker & Watkins, Malvern, PA, for American Exp. Centurion Bank.

Thomas R. Hitchcock, Chicago, IL, for debtor.

Craig Phelps, Chapter 13 Standing Trustee, Chicago, IL.

MEMORANDUM OPINION

RONALD BARLIANT, Bankruptcy Judge.

I. INTRODUCTION

The Chapter 13 standing trustee objected to the proof of unsecured claim filed by American Express Centurion Bank ("AMEX") on the sole ground that the proof of claim was filed late. This Court holds that tardiness bars allowance of a claim.¹ Therefore, the objection is sustained and AMEX's claim will not be allowed.

II. JURISDICTION

This Court has jurisdiction pursuant to 28 U.S.C. § 1334 and General Rule 2.33(A) of the United States District Court for the Northern District of Illinois. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (B).

III. FACTS

The Debtor filed a Chapter 13 petition on April 2, 1993. The first date set for the meeting of creditors was May 11, 1993. The deadline for the filing of claims was accordingly set for August 9, 1993 pursuant to FED.R.BANKR.P. 3002(c) (i.e. "within 90 days after the first date set for the meeting of creditors"). AMEX did not file a proof of claim until November 9, 1993. On March 22, 1994, the trustee objected to the claim, asserting that the claim was untimely filed and should thus be disallowed. AMEX responded by relying on In re Hausladen, 146 B.R. 557 (Bankr.D.Minn.1992) ("en banc")² for the proposition that late-filed claims can be allowed in a Chapter 13 case.

IV. BACKGROUND

At issue is whether a creditor's untimely or tardily filed proof of claim should be allowed in a Chapter 13 case. This is a controversial issue under the Bankruptcy Code ("Code") as it existed prior to the 1994 amendments and it has generated a flurry of decisions as well as a distinct split in authority. The leading opinion for the proposition that late-filed claims may be allowed in a Chapter 13 case is In re Hausladen, 146 B.R. 557 (Bankr.D.Minn.1992) (en banc). On the flip-side, the decision in In re Zimmerman, 156 B.R. 192 (Bankr.W.D.Mich.1993) (en banc)³ is the leading case for the proposition that late-filed claims are not allowed in a Chapter 13 case.

V. ANALYSIS

A. Pre-Code Practice

The concept of requiring creditors to file proofs of their claims within a certain period of time has its origin in the Bankruptcy Act of 1898 ("Bankruptcy Act" or "Act"). Prior to the Act, there was no limit on the time to file claims. The absence of a time limit was perceived as unduly lengthening the administration of the "bankrupt's" estate; Congress therefore set a one-year limitation period for the filing of creditors' proofs of claims, reduced in 1926 to six months. The 1938 Chandler Act changed the starting point from the date of adjudication to the first date set for the creditors' meeting. The change was accomplished by § 57(n) of the Act, which stated in part:

all claims provable under this Act . . . shall be proved and filed in the manner provided in this section. Claims which are not filed within six months after the first date set for the first meeting of creditors shall not be allowed. . . .

11 U.S.C. § 93(n) (repealed 1978).

Section 57(n) also dealt with late-filed claims: "When in any case all claims which have been duly allowed have been paid in full, claims not filed within the six month time period may nevertheless be filed within such time as the court may fix or for cause shown extend and, if duly proved, shall be allowed against any surplus remaining in the estate." Id. Section 57(n), like most provisions under the Act, had a corollary in the old Rules of Bankruptcy Procedure ("old Rules").⁴ Old Rule 13-302(e)(2) was "adapted from § 57(n) of the Act and retains the time limits on the filing of claims established by the statutory provisions." Fed. R.Bankr.P. 13-302, Adv.Comm. Note. Interestingly, the Advisory Committee omitted the provision in § 57(n) regarding payment of any surplus to late-filing creditors because the Committee deemed it "inconsistent with the rehabilitative purpose of Chapter XIII." Id.

The majority of courts held the 6 month time period contained in Rule 13-302(e)(2) and § 57(n) of the Act to be a strict statute of limitations.⁵ These courts also held that the bankruptcy court lacked the discretion or the equitable power to extend the filing date. See, e.g., In re Wilkens, 731 F.2d 462, 464 (7th Cir.1984) (per curiam); In re Pigott, 684 F.2d 239, 243 (3d Cir.1982). See also, In re Good News Publishers, Inc., 33 B.R. 125, 126 (M.D.Tenn.1983) ("the filing deadline for proof of claims `may not be extended once it expires and . . . the court's equitable authority is not thereafter available'") (citation omitted). The majority view under the Act, then, was that the six month period was to be strictly applied and time extensions for filing were to be granted only according to the Rule and the statute. There was no room for judicial ruling of so-called "equitable considerations" in allowing untimely filed claims; the bankruptcy court lacked discretion to do anything but disallow such untimely filed proofs.

B. Code Practice

Section 501 of the Bankruptcy Code governs the filing of proofs of claim: "a creditor . . . may file a proof of claim." 11 U.S.C. § 501(a). The legislative history indicates that § 501 "governs the means by which creditors . . . present their claims . . . to the court . . ." and that subsection (a) "is permissive only, and does not require filing of a proof of claim by any creditor. . . . The Rules of Bankruptcy Procedure and practice under the law will guide creditors as to when filing is necessary and when it may be dispensed with. In general, however, . . . a proof of claim will be a prerequisite to allowance for unsecured claims . . ." H.R.Rep. No. 595, 95th Cong., 1st Sess., 351 (1977); S.Rep. No. 989, 95th Cong., 2d Sess., 61 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5847, 6307.

If a creditor fails to timely file his proof of claim, then "the debtor or the trustee may file a proof of such claim." § 501(c). Once the proof of claim is filed under § 501, the claim is "deemed allowed, unless a party in interest . . . objects." § 502(a). Where such an "objection to a claim is made, the court . . . shall determine the amount of such claim . . . and shall allow such claim . . . in such amount. . . ." § 502(b). There are eight exceptions to § 502(b), whereby the court is to disallow the claim if it fits within one of the eight enumerated exceptions. Id.⁶

The Code itself does not discuss what constitutes a "timely" filed proof of claim. However, this omission is by design: "The Rules of Bankruptcy Procedure will set the time limits, the form, and the procedure for filing, which will determine whether claims are timely or tardily filed." H.R.Rep. No. 595, 95th Cong., 1st Sess., 351 (1977); S.Rep. No. 989, 95th Cong., 2d Sess., 61 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5847, 6307. Rule 3002 of the Federal Rules of Bankruptcy Procedure fills the statutory gap left by Congress' intentional omission.⁷ The ability of a court to extend the filing period is limited by Rule 9006(b)(3). That Rule provides that "the court may enlarge the time for taking action under Rule . . . 3002(c) . . . only to the extent and under the conditions stated in those rules." FED.R.BANKR.P. 9006(b)(3). None of those conditions is pertinent here.

Prior to the decision in In re Hausladen, nearly every court that considered the question under Rule 3002(c) followed the majority view regarding § 57(n) of the Act and old Rule 13-302 that late-filed claims were barred.⁸ Assuming that the interpretation of old Rule 13-302 and § 57(n) of the Act was correct, then this interpretation should apply to §§ 501 and 502 and Rule 3002(c) because "Subdivision (c) is adapted from former Bankruptcy Rule 302(e) but changes the time limits on the filing of claims in chapter 7 and 13 cases from six months to 90 days after the first date set for the meeting of creditors." FED.R.BANKR.P. 3002(c), Adv.Comm. Note.⁹

C. The Hausladen Decision

Prior to the decision in In re Hausladen, therefore, it was well-settled that late-filed claims were to be disallowed and extensions of time were limited to the situations explicitly described in Rule 3002. The court in Hausladen, however, rejected those principles by allowing late-filed claims in all circumstances. 146 B.R. 557 (Bankr.D.Minn. 1992) (en banc).

The court rejected the view that timely filing is a prerequisite to allowance. Id. at 559. The court reasoned that when Rules 3002(a) and 3002(c) are read together, they merely imply that timely filing is a prerequisite to allowance. Id. The court explained that it is improper to read these Rules as mandating timely filing as a prerequisite to allowance by concluding that "the drafters of the new Rule 3002 hastefully copied the substance of old Rule 302 without paying any attention to the major change in the underlying statute." Id. This major change was that the Act contained an express time bar, but the Code does not. Id. The Act, unlike the Code, provided that claims filed after a specified date "shall not be allowed." See 11 U.S.C. § 93(n) (repealed 1978). There is no similar language in §§ 501 or 502 of the Code. 146 B.R. at 559.

The majority of the court's analysis centered around § 502, however. The court first noted that § 502 exclusively governs the allowance and disallowance of claims and that § 502 lists eight specific grounds for disallowance. Id. The late filing of claims is not among the listed grounds. Id. The court reasoned that (a) all claims are deemed allowed unless a party in interest objects per § 502(a); (b) even if an objection is...