File Your Claims on Time: When Excusable Neglect is Not Enough
The deadline for filing a proof of claim in a bankruptcy varies depending upon under which chapter of the Bankruptcy Code the bankruptcy was filed. In a chapter 7, 12 or 13, the deadline is absolute, whereas in a chapter 9 or 11, the deadline can be extended for cause, including excusable neglect.
Federal Rule of Bankruptcy Procedure 3002 governs the filing a proof of claim in chapter 7, chapter 12 and chapter 13 cases. Pursuant to Bankruptcy Rule 3002(c), an unsecured creditor or equity security holder is required to file a proof of claim no later than 90 days after the first date set for the §341 meeting of creditors . Local Rule 3002-1 modifies Bankruptcy Rule 3002 in chapter 7 no asset cases and chapter 7 cases converted from chapter 13. Under each of these scenarios, a proof of claim must be filed 90 days after the chapter 7 trustee files a “Notice of Assets.”
The time for filing a proof of claim fixed by Bankruptcy Rule 3002(c) works like a statute of limitations in that the holder of a late filed claim will not receive a distribution from the estate, absent a surplus. In re Coastal Alaska Lines, Inc., 920 F.2d 1428 (9th Cir. 1990). Accordingly, the United States Supreme Court has found that excusable neglect is not recognized as a basis to extend the bar date in chapter 7 case. Pioneer Services Co. v. Brunswick Associates Ltd. Ptshp, 507 U.S. 380 (1993). District Courts and Bankruptcy Courts in the Southern District of Florida have ruled consistent with Pioneer Services Co. when faced with the issue of extending the claims bar deadline in a chapter 7 case based upon excusable neglect. See, In re Ford Business Forms, Inc., 180 B.R. 294 (S.D.Fla.1994) (affirming bankruptcy court’s denial of creditor’s motion to allow proof of claim filed after the bar date deadline); In re DV8, Inc., 2010 WL 3393735 (Bankr. S.D. Fla.) (held that “excusable neglect” was not legitimate basis for seeking claims bar deadline extension in chapter 7 case, even one that originally started out under chapter 11.)
Bankruptcy Rule 3003 governs the filing of a proof of claim in chapter 9 and chapter 11 cases. However, unlike Bankruptcy Rule 3002, Bankruptcy Rule 3003(c) does not set up an absolute statute of limitations leaving the court with no discretion to allow late-filed claims. Rather, Bankruptcy Rule 3003(c)(3) provides that the court “for cause shown may extend the time within which proofs of claim or interest may be filed.” Such an extension may be sought and granted before or after the time has expired under the court’s order fixing a bar date.
The different rules in chapter 7 and chapter 11 cases correspond with the differing policies of the two chapters. Whereas the aim of a chapter 7 liquidation is the prompt closure and distribution of the debtor’s estate, Chapter 11 provides for reorganization with the aim of rehabilitating the debtor and avoiding forfeitures by creditors. Pioneer Services Co., citing United States v. Whiting Pools, Inc., 462 U.S. 198 (1983). In overseeing this latter process, the bankruptcy courts are necessarily entrusted with broad equitable powers to balance the interests of the affected parties, guided by the overriding goal of ensuring the success of the reorganization. Id. citing NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984).
Therefore, if you are representing a creditor of a chapter 7, 12 or 13 bankruptcy estate, it is of the utmost importance that you or your client timely file a proof of claim. Failing to timely file a proof of claim can not only lead to your client’s missing out of its pro rata share of a distribution, but potentially a malpractice action against you.
Bankruptcy Rule 3002(c) provides six exceptions for specific situations where a court may extend the bar date.