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Northern District of Ohio Bankruptcy Court Holds that the Deadline for Filing a Proof of Claim Applies to Secured Mortgage Creditors in Chapter 13 Cases

Posted By USFN, Wednesday, February 22, 2017
Updated: Thursday, February 16, 2017

February 22, 2017

by Edward J. Boll III
Lerner, Sampson & Rothfuss, LPA – USFN Member (Kentucky, Ohio)

On February 6, 2017, Northern District of Ohio Bankruptcy Judge Whipple held that the deadline for filing a proof of claim within 90 days after the 341 meeting of creditors applies to secured creditors in Chapter 13 cases, even though secured creditors are not required to file claims.

After extending the deadline for the mortgage creditor on the debtors’ residence to file a proof of claim (POC) by an additional three months, the creditor’s POC was filed six months after the extended deadline and more than a year after the case was commenced. The debtors filed an objection to the creditor’s proof of claim on the basis that the POC was late. (The debtors had filed a POC for the creditor earlier in the case, which underestimated the creditor’s claim by approximately $20,000.)

The bankruptcy court pointed out that the Bankruptcy Rules provide that a secured creditor in a Chapter 13 case may, but is not required to, file a proof of claim. Instead, a secured creditor may choose to not participate in the bankruptcy case and, after the bankruptcy case is concluded, look to its lien for satisfaction of the debt to the extent of its in rem rights.

If a secured creditor wishes to participate and receive distributions in a Chapter 13 case, however, the court held that a POC must be filed. If filed, the court pondered the disagreement among courts as to whether the filing deadline applies to the POC. Judge Whipple conceded that some courts have concluded that the claims bar date does not apply since secured creditors are not mentioned in the Bankruptcy Rule establishing the POC bar date.

Ultimately, the court agreed with the determination of other courts that the claims bar date Bankruptcy Rule applies to all creditors (including secured creditors), noting that the rule makes no distinction between secured and unsecured creditors. The court held that the creditor’s proof of claim was not timely filed and was, therefore, disallowed.

The case citation is In re Dumbuya, Case No. 15-33176 (Bankr. N.D. Ohio, Western Division (Toledo), Feb. 6, 2017).

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