Bar News - July 13, 2012
Federal Practice & Bankruptcy: Filing the Proof of Claim in Bankruptcy Court
By: Christopher Somma
In these economic times, many lawyers find themselves getting increasingly involved in Bankruptcy Court. Often times a client will call and request assistance with the filing of the Proof of Claim. The information provided in this article is intended to provide a basic framework for filing a Proof of Claim on behalf of the client.
In Bankruptcy Court, a "debt" is a liability on a claim. 11 U.S.C. § 101(12). A "creditor" is "an entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor," 11 U.S.C. § 101(10)(A), and a "claim" is a "right to payment whether or not such right is reduced to judgment." 11 U.S.C. § 101(5)(A). The Supreme Court has explained that the definition of "claim" is to be construed broadly, and that a "right to payment" means "nothing more nor less than an enforceable obligation." Pennsylvania Dep’t of Pub. Welfare v. Davenport, 495 U.S. 552, 559 (1990). "Absent an overriding federal interest, the existence of a claim in bankruptcy is generally determined by state law." Premier Capital, LLC v. Gavin, 319 B.R. 27, 33 (1st Cir. 2004) (quotation omitted).
If the Chapter 7 Trustee discovers assets, or the Debtor files a Chapter 11, 12, or 13 Plan, should a creditor wish to be paid pursuant to the Plan or assets discovered, a Proof of Claim must be filed. The actual Proof of Claim package to be filed with the Bankruptcy Court consists of the following documents: (1) the completed B10 form; (2) a copy of the documents showing that the Debtors owe the debt claimed; (3) if a security interest, for example, a mortgage, the relevant documents (the mortgage); (4) if the amount of the debt claimed includes interest or other charges (not just principal), an itemized break down showing the portions of the claim compromised of principal, interest, and other charges. See Fed. R. Bankr. P. 3001.
Upon filing a Proof of Claim pursuant to 11 U.S.C. § 501 the claim is deemed allowed unless a party in interest objects. 11 U.S.C. § 502(a). If the claim comports with the requirements of Fed. R. Bankr. P. 3003, the Proof of Claim supersedes any scheduling of the claim or interest pursuant to 11 U.S.C. § 521 and serves as prima facie evidence of the validity of the claim as to liability and amount. Fed. R. Bankr. P. 3001(f) and Fed. R. Bankr. P. 3003(4). The interposition of an objection does not deprive the proof of claim of presumptive validity unless the objection is supported by substantial evidence. In re Hemingway Transport, Inc., 993 F.2d 915, 925 (1st Cir. 1993) (citations omitted).
The presumption is a procedural device that places on the debtor (or trustee) the burden of producing evidence to rebut the presumption. In re Colonial Bakery, Inc., 108 B.R. 13, 15 (Bankr. D.R.I. 1989) (explaining that (1) a claimant establishes a prima facie case against the debtor upon the execution and filing of a proof of claim in accordance with Fed. R. Bankr. P. 3001; (2) the objecting party is then required to produce evidence to rebut the claimant’s prima facie case; (3) once the objecting party produces such rebuttal evidence, the burden shifts back to the claimant to produce additional evidence to prove the validity of the claim by a preponderance of the evidence; and (4) the ultimate burden of proof always rests upon the claimant (cited in In re Pontarelli, 169 B.R. 499, 501 (Bankr. D.R.I. 1994)).
The importance of filing an accurate Proof of Claim cannot be overstated. Any litigation involving a Proof of Claim or any issue litigated in the Proof of Claim may estoppe the losing party from litigating those issues in any other matter or case. See Crepeau v. JP Morgan Chase Bank, N.A., 2011 U.S. Dist. LEXIS, * 16 (D.N.H. December 5, 2011) (finding that Plaintiff was estopped from relitigating claims made in her Objection to the creditor’s Proof of Claim).
In short, read rules, follow the rules, use the correct form and make certain that the information provided to you by the client is accurate before filing the Proof of Claim in Bankruptcy Court.
Christopher J. Somma
Christopher J. Somma received his B.A. in Religion and Sociology from Bates College and a J.D.from the UNH School of Law. He is an attorney in the Boston Office of Goodwin Procter, Consumer Financial Services Litigation Department, where he focuses on lender liability claims in state courts, bankruptcy courts, and U.S. District Court in Massachusetts, Maine, and New Hampshire.