For a creditor, the “bar date” in a Chapter 13 case is an important deadline. It is the date by which a creditor must file its proof of claim in order to be included in a debtor’s Chapter 13 plan. Many bankruptcy courts do not strictly enforce the bar date and will allow creditors to file a late claim, so long as the debtors and their attorneys consent to the untimely filing. However, the United States Bankruptcy Court for the Southern District of New York has recently decided to rigidly adhere to this deadline, holding that late claims are not allowed in Chapter 13 cases. In Re Egan, 526 B. R. 111, 112 (Bankr.S.D.N.Y.2015).
In this case, debtors filed a Chapter 13 petition on September 8, 2014. Objections to confirmation were due by November 10, 2014, and the deadline for proof of claims was December 30, 2015. Secured creditor, Ocwen, filed an objection to the confirmation of debtors’ plan on September 29, 2014. On January 6, 2015, debtors filed a proof of claim on behalf of Ocwen in the amount of $1.00. Ocwen subsequently filed a proof of claim in the amount of $134,416.38 on January 12, 2015, followed by a motion to allow the late claim on January 26, 2015. Both the Chapter 13 trustee and the debtors opposed Ocwen’s motion.
Ocwen’s motion employed two arguments: First, Ocwen argued that the proof of claim was not late under the excusable neglect analysis, as set forth in Pioneer Investment Services. Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380 (1993). However, the court found that Bankruptcy Rule 3002(c) contained no such exception for excusable neglect. Ocwen also argued that its timely objection should be considered an informal proof of claim using the four-prong test laid out in In re Dumain, 492 B.R. 140, 148 (Bankr.S.D.N.Y.2013). However, the court, following a number of appellate decisions, added a fifth prong to the informal proof of claim test: whether “it would be equitable to treat the document as a proof of claim”. Egan, 526 B.R. at 114. The court held that Ocwen, as a sophisticated creditor with bankruptcy counsel, was well aware of the bar date and that the claim “is worth more than the debtor will pay over the current life of the plan.” Id. at 115. The court further stated that Ocwen was not prejudicially affected by the inability to file the late claim “as secured creditors may look to their lien for satisfaction of their debt.” Id. The Court did not even allow Ocwen to amend the proof of claim filed by the debtors on its behalf.
In light of the decision reached in the Southern District of New York, the last date to file a proof of claim is of the utmost importance to creditors, especially secured creditors, filing claims in these Chapter 13 cases.
For more information please contact via email Mario A. Serra or by phone at 973-538-4700 ext. 196.
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