Last week on this site, I discussed In re: Wingerter. B-Line, LLC v. Wingerter, a recent Sixth Circuit Court of Appeals decision which addressed the issue of what creditors must do to file a valid proof  of claim.  The important feature of the Wingerter case, from a commercial debtor’s perspective, is that Chapter 7 and  Chapter 13 debtors (or their attorneys) must be vigilant in scrutinizing every proof of claim that is filed in their cases, because creditors (or companies that purchase the original debts, such as B-Line, L.L.C.) will sometimes file proofs of claim based upon scant or nonexistent evidence. Challenges to proofs of claim can be important as they can determine whether a particular debt is dischargeable or in some cases, whether the debtor gets to keep a particular asset.

If you receive a proof of claim in your bankruptcy case, a number of questions should be asked (apart from the obvious question of whether you actually incurred the debt).  For example, the proof of claim should be on Official Form B10 (or its substantial equivalent). If the creditor used some other format, the proof of claim might not be valid.  In addition, the proof of claim must be filed with the clerk in the district in which the bankruptcy case is pending. Bankruptcy Rule 5005(a). If the creditor has filed the proof of claim in some other court for some reason, this may also invalidate the claim.  It should also be noted that proofs of claim must be filed electronically in the Eastern District of Michigan Bankruptcy Court, see Administrative Order No 05-04.

Debtors should also be aware that the proof of claim must be filed no later than 90 days after the first scheduled meeting of creditors in Chapter 7, 11, 12, and 13 cases in the Eastern District of Michigan.  Bankruptcy Rule 3002(c), 3003(c)(3); LBR 3003-1 (EDM). If the creditor failed to meet a filing deadline, they may have forfeited the claim.  11 USC 502(b)(9).

If the creditor’s claim is based on a written document, examine the proof of claim to determine whether they have filed a copy of it with the proof of claim. Bankruptcy Rule 3001(c). (This was the issue in the Wingerter case; the creditor ultimately withdrew the claim because it was not able to provide supporting documentation).  If the writing has been lost or destroyed, a statement of the circumstances of the loss or destruction should be filed with the claim.  Bankruptcy Rule 3001(c).  Failure to do so also provides a potential basis for challenging the claim’s validity.

Similarly, if the creditor claims a security interest in the property of the debtor, examine the proof of claim to determine whether it includes evidence that the security interest has been perfected. Bankruptcy Rule 3001(d). Evidence of perfection includes a UCC financing statement, a mortgage, or a deed of trust.

For more information on proofs of claim, see my recent entry on the O’Connor, DeGrazia, Tamm & O’Connor website.

-Drew Broaddus