By Ryan C. Wood
We should probably start with what a proof of claim is as part of the bankruptcy process. A claim is broadly defined by the Bankruptcy Code. Section 101(5) provides the definition of a claim as: (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. So then a proof of a claim is how creditors provide and prove what they believe they are owed at the time a bankruptcy case is filed.
Not all bankruptcy cases require the filing of proof of claims by creditors of the bankruptcy filer. That is because not all bankruptcy cases include assets or funds available to pay creditors at all. To find the claims bar date in a bankruptcy case look at the notice of meeting of creditors. This notice, in most jurisdictions I am familiar with, provide a number of dates and deadlines. One of those deadlines is the claims bar date. Here in the Northern District of California the first deadline listed is the claims bar date. Our notice provides: Deadline to File a Proof of Claim: For all creditors (except government unit): (date inserted here) For governmental unit (except otherwise provided in Fed. R. Bankr. P. 3002(c)(1). The government unfortunately gets an extra 60 days or so the file their proof of claim for unpaid taxes or some other government debt. I really do not know why this is. I can say that the difference in deadlines to file a claim causes many problems with the administration of a chapter 13 case. The government always seems to receive special treatment versus all us normal tax paying citizens. Seems to me us human beings should have more time to file a proof of claim and the government should have less time. The government should be able to file a proof of claim quickly given the information is no doubt readily available.
Chapter 7 Liquidation and Proof of Claims
There are two types of Chapter 7 Liquidation cases. The Chapter 7 Liquidation case will either be an “asset” case or “no asset” case. This is exactly how it sounds. An asset case has a bankruptcy estate with assets that cannot be protected and therefore subject to liquidation for the benefit of creditor by the Chapter 7 Trustee assigned to the case. In a no asset case all of the bankruptcy filers assets can be protected or exempted so there is nothing to sell or liquidate for the benefit of creditors. If there are assets available or if the Chapter 7 Trustee believes there will be assets for the benefit of creditors the Chapter 7 Trustee will file a notice of possible dividends ds available to creditors. Then creditors have a limited amount of time to file a “formal” proof of claim by the deadline or claims bar date. In reorganization cases under Chapter 9, 12, 13 or 15 creditors are provided notice to file proof of claims by the claims bar date.
Reorganization Bankruptcy Cases and Proof of Claims
In all reorganization cases creditors are instructed to file proof of claims as soon as the reorganization case is filed. All proof of claims are supposed to fulfill the requirements of FRBP 3001. If so then the proof of claim is prima facie evidence of the validity of the claim. If the proof of claim does not meet the requirements of FRBP 3001, the claim is inaccurate or the claim is not owed, an objection to the claim must be filed. As a bankruptcy attorney we want all of the claims to be filed as soon as possible so we can finalize the chapter 13 plan of reorganization and obtain confirmation or approval of the chapter 13 plan by the bankruptcy court. It is common for chapter 13 plans to be confirmed or approved prior to all of the claims coming in. If a claims is different than the amount listed in the chapter 13 plan, and the plan was confirmed, then you will have to spend the time and money to modify the plan to change the numbers.
What is a “Formal” Proof of Claim?
A formal proof of claim can be described as a claim that is filed within the time period for claims to be filed and meeting the requirements for the filing of a proof of claim pursuant to Federal Rule of Bankruptcy Procedure 3001. There is a form that must be used when filing a claim, Official Form 410. This is what can be called a “Formal” claim.
What is an “Informal” Proof of Claim?
As a bankruptcy lawyer that has touched thousands of bankruptcy cases I must admit I did not know too much about “informal” proof of claims. From time to time I represent creditors and I file a “formal” proof of claim on the creditors behalf. I guess you have to make a mistake and not file a “Formal” proof of claim to be forced to argue there is an “Informal” proof of claim. To constitute an informal proof of claim, a document must: (1) be presented via a writing; (2) be presented within the time frame for the filing of claims; (3) be asserted by or on behalf of the creditor; (4) be brought to the attention of the bankruptcy court; (5) indicate an intent to assert a claim against the estate in a set or determinable amount. See In re Franciscan Vineyards, Inc., 597 F.2d at 182-83; Pacific Resource Credit Union v. Fish (In re Fish), 456 B.R. 413, 417 (9th Cir. BAP 2011); In re Edelman, 237 B.R. at 155.
More or less you are trying to piece together a claim by other writings and filings in the bankruptcy case to prove you have a claim that should be allowed. So I will write the bankruptcy court a letter, signing it as a creditor in the bankruptcy case, the letter will be sent during the time frame for filing claims that says, “I think I am owed money from the bankruptcy filer.” This is clearly a writing asserted by a alleged creditor sent during the time frame to file claims. So we get to was the letter brought to the attention of the bankruptcy court and did the letter indicate an intent to assert a claim? So 1, 2 and 3 are met. But what of the 4 and 5th requirement?
The Ninth Circuit has long applied a rule of “liberality in amendments” to creditors’ proofs of claim, permitting a later filed claim to relate back to a prior informal claim. See Wright v. Holm (In re Holm), 931 F.2d 620, 622 (9th Cir. 1991); County of Napa v. Franciscan Vineyards, Inc. (In re Franciscan Vineyards, Inc.), 597 F.2d 181, 182-83 (9th Cir. 1979) (citing In re Patterson-MacDonald Shipbldg. Co., 293 F. 190, 191 (9th Cir. 1923)).
1. It is not necessary that an informal proof of claim be filed with the bankruptcy court. See In re Holm, 931 F.2d at 622 (9th Cir. 1991)
2. Informal letter sent to the trustee who did not forward it to the bankruptcy court or any other party. See In re Franciscan Vineyards, Inc., 597 F.2d at 183 (9th Cir. 1979)
3. Informal letter sent to trustee’s counsel in response to a collection letter demanding payment to the estate. See In re Anderson-Walker Indus., Inc., 798 F.2d 1285, 1286 (9th Cir. 1986)
If the writing is not filed with the court how can it be brought to the attention of the bankruptcy court? In the recent Ninth Circuit Bankruptcy Appellate case the writing was a letter and the letter was attached to a motion to extend the deadline to object to the debtor’s discharge pursuant to Section 727. The writing in question was attached as an exhibit in support of the motion to extend time. While the writing/letter was not formally filed with the court it was brought to the court’s attention in the motion to extend time and each and every creditor in the case as well as the debtor and their counsel. The motion and exhibit were served on all parties as indicated in the proof of service filed with the court. The letter to the trustee also provided they, the creditor, obtained a state court judgment totaling over $500,000 and were not listed a a creditor in the bankruptcy filings.
Sounds like bootstrapping a valid proof of claim to me. At the same time bankruptcy is a court of equity or fairness. Under the facts of the present Ninth Circuit Bankruptcy Appellate Panel Case the creditor not being allowed a claim in the bankruptcy case would have been extremely unfair given this creditor assisted the trustee with realizing funds for the benefit of creditors. If they were not allowed to be one of those creditors it would have been most unfortunate.