Client Alert: From the Scheer Law Group: Eat your Vegetables and File a Proof of Claim in Every Chapter 13 Matter you are Involved in

To All SLG Clients and Affiliates.

From: Spencer Scheer
Date: October 31, 2016
Client Alert: From the Scheer Law Group:
Subject: Eat your Vegetables and File a Proof of Claim in Every Chapter 13 Matter you are Involved in!

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This may come as no surprise, but the Ninth Circuit Court of Appeals in the case of In re Spokane Law Enforcement Federal CU v. Marcella Lee Barker et. al., US Court of Appeals, 9th, Case No. 14-60028 (October 27, 2016), has ruled that the failure to file a proof of claim in a Chapter 13 case, bars the creditor from obtaining a distribution. This is the case, even if the debtor schedules your claim. This may be the case, even if you “wake up” and file a late claim and ask the court to allow the late filing. The good news is that court confirmed that the creditor’s lien was not invalidated by failure to file the claim (confirming its prior ruling in the Blendheim, case.

Generally, a proof of claim in a Chapter 13 case must be filed within 90 days of the first date set for the Meeting of Creditors (11 USC§ 502(b)). I can state unequivocally, that many SLG clients miss proof of claim bar dates and will seek to rely on the fact that the Debtor may have listed the claim/debt in the schedules, or that the Court may allow a late filed claim under equitable principles. This case takes away these alternatives in almost all cases.

How many of you would like to wait three years on a delinquent auto or real property case to be able to take action to remedy the default? While it is possible that a creditor may still be able to ask the court for relief from stay if adequate protection (payments) are not provided during the term of the reorganization (an issue not specifically addressed in this case), the result is uncertain and puts you at the mercy of the court, given this ruling.

The moral of this story is clear:

Ensure that in every Chapter 13 case, you calendar the date to file a POC and ensure that it is done, or that your agents or servicers get it done. The case opinion can be found at:

https://cdn.ca9.uscourts.gov/datastore/opinions/2016/10/27/14-60028.pdf

Please call me if you would like to discuss.

Spencer Scheer