Robert E. Grant Chief Judge, United States Bankruptcy Court
DECISION
On April 17, 2017.
Deadlines may lead to unwelcome results, but they prompt parties to act and they produce finality.
Taylor v. Freeland & Kronz,
503 U.S. 638, 644,
112 S. Ct. 1644, 1648,
118 L. Ed. 2d 280 (1992).
This case presents a surprisingly common scenario - the debtor proposes, and the court confirms, a chapter 13 plan which provides for payments to a secured creditor, but the creditor fails to file a proof of claim. Here, the debtor's confirmed plan provides that Car Credit Corporation will be paid in full, with interest, on account of its lien against a motor vehicle. There is no dispute that Car Credit received appropriate notice of the bankruptcy, did not object to confirmation and did not file a proof of claim. Several months after the deadline for filing claims passed, the trustee filed a motion for post confirmation modification, proposing to take the funds the plan had allocated to Car Credit and distribute them to unsecured creditors. While that motion was pending, on January 4, 2017, the debtor filed a proof of claim on Car Credit's behalf, to which the trustee has objected as untimely. Soon thereafter, Car Credit filed an objection to the trustee's motion to modify. The matter is before the court to consider the trustee's motion to modify the plan and her objection to the claim the debtor filed for Car Credit. The issues presented have been submitted to the court on stipulations of fact and the briefs of counsel. There is no dispute that the creditor received appropriate notice of the bankruptcy and the claims bar date or that the claim the debtor filed for it was late.
If a creditor fails to file a timely claim, the debtor (or the trustee) may do so within 30 days after the expiration of the creditor's deadline. 11 U.S.C. § 501(c); Fed. R. Bankr. P. Rule 3004. Moreover, unlike the creditor's claims bar date which may not be circumvented by equitable considerations, Matter of Greenig 152 F.3d 631, 635 (7th Cir. 1998), Bankruptcy Rule 9006(b)(1) allows the debtor's deadline to be extended after it expires "where the failure to act was the result of excusable neglect." Fed. R. Bankr. P. Rule 9006(b)(1). Car Credit argues that excusable neglect should prompt the court to overlook the debtor's untimely claim. See, Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 113 S.Ct 1489 (1993). Unfortunately, the facts that it relies upon to establish excusable neglect do not relate to the actions of either the debtor or debtor's counsel. See, Pioneer, 507 U.S. at 397, 113 S.Ct at 1499 ("the proper focus is upon whether the neglect of the [delinquent party] and their counsel was excusable."). Those facts - that Car Credit had inadvertently misplaced the notice of bankruptcy and the debtor's confirmed plan specifically contemplates paying its secured claim in full - relate to the creditor's actions and attempt to explain its failure to file a timely claim; they do not explain why the debtor failed to do so. Consequently, the claim debtor filed cannot be considered timely. 11 U.S.C. § 502(b)(9).
The deadline for non-governmental creditors to file claims was July 5, 2016, making the claim the debtor filed late, by many months.
Although Greenig was a chapter 12 case, the rules concerning claims are the same for both chapter 12 and chapter 13. See, Fed. R. Bankr. P. Rule 3002(c), 3004; In re Brooks, 370 B.R. 194, 198 (Bankr. C.D. Ill. 2007).
The creditor's bar date in cases under chapters 7, 12 and 13 is governed by Bankruptcy Rule 3002(c). That rule includes its own provisions for an extension of time and other reasons are not permitted. Fed. R. Bankr. P. Rule 9006(b)(3).
The debtor has never filed a motion for a belated extension of time, as contemplated by Rule 9006(b)(1) - "on motion made after the expiration . . ." - and the only arguments concerning excusable neglect are those advanced to explain the creditor's failure to file on time.
Section 502(b)(9) makes no distinction between claims filed by creditors and the claims debtors may file for them. When they are objected to, late claims are to be denied. 11 U.S.C. § 502(b)(9). See also, In re Pajian, 785 F.3d 1161, 1163-64 (7th Cir. 2015) (court must disallow untimely claim); Matter of Greenig, 152 F.3d 634 (7th Cir. 1998); In re Ford, 205 B.R. 960 (Bankr. N.D. Ala. 1996) (trustee's objection to untimely claim filed by debtor is sustained).
The fate of Car Credit's objection to the trustee's motion to modify follows naturally from the decision concerning its claim. Without an allowed claim, it is not entitled to a distribution under the debtor's confirmed plan, see, Pajian, 785 F.3d at 1163-64; In re Baldridge, 232 B.R. 394 (Bankr. N.D. Ind. 1999), and since the trustee will not be able to distribute the money that has been earmarked for the payment of its secured claim, those funds will just sit somewhere. The failure to file a timely proof of claim can alter the provisions of a confirmed plan and, once allowed claims are established, adjustments may be required. See, Greenig, 152 F.3d at 635; In re Witkowski, 16 F.3d 739, 740-41 (7th Cir. 1994). Section 1329 accommodates this possibility by allowing a confirmed plan to be modified to "increase or reduce the amount of payments on claims of a particular class provided for by the plan." 11 U.S.C. § 1329(a)(1). That is all the trustee wants to do here: increase the payments to the unsecured creditor class to account for the inability to make a distribution to Car Credit because it does not have an allowed claim. That is certainly a reasonable proposition and far better than the alternative of letting the funds accumulate to no good purpose. Cf. Germeraad v. Powers, 826 F.3d 962, 974 (7th Cir. 2016) (approval of a post confirmation is discretionary); Witkowski, 16 F.3d at 746 (same).
Another alternative could be to construe the plan's provisions authorizing the trustee to make a distribution to Car Credit as being contingent upon it having an allowed claim so that in the absence of such a claim they would automatically become inoperable, without the need for anything further. In the court's opinion, the increased clarity resulting from the trustee's proposed modification is a virtue. --------
The trustee's objection to the claim the debtor filed on behalf of Car Credit Corporation is sustained and that claim will be denied. The trustee's motion for post confirmation modification is granted and the proposed modification, filed on December 9, 2016, will be approved. An appropriate order will be entered.
/s/ Robert E . Grant
Chief Judge, United States Bankruptcy Court