DEBTOR-FILED ACKNOWLEDGMENTS OF CREDITORS’...

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DEBTOR-FILED ACKNOWLEDGMENTS OF CREDITORS’ CLAIMS: AN ALTERNATIVE

APPROACH TO PROOF OF CLAIM IN CHAPTER 13

Arpan K. Punyani*

INTRODUCTION Each year, Chapter 131 creditors lose out on millions of dollars

merely because they neglect to file proof of their claims before the required deadline, or because they fail to convince a court that their earlier communications amounted to a proof of claim.2 Under the relevant statutory provisions,3 the general rule regarding proofs of claim is that creditors must file a “formal”4 proof of their claim with the court; those who miss the bar date5 for filing proofs of claim have virtually no recourse,6 and are thus shut out of the Chapter 13 plan’s distribution of funds. Generally, then, there is no question that probably the “single most important act” for a Chapter 13 creditor is to timely file a proof of * Senior Articles Editor, Cardozo Law Review. J.D. Candidate (2007), Benjamin N. Cardozo School of Law; B.A., University of Pennsylvania (2002). I would like to express deep gratitude to Professor David G. Carlson for his assistance in selecting the topic for this Note, and for his thoughtful guidance throughout the research and writing process. I would also like to thank Isabella Lacayo, Andrew Pak, and Haifeng Peng for their insightful comments and suggestions in reviewing drafts. I especially would like to thank my parents and brothers for their constant love and support. Most of all, I would like to thank Aneesha, whose love and devotion help me succeed in spite of myself. 1 As will be discussed infra Part I.A, Chapter 13 of the Bankruptcy Code pertains to the reorganization of the debts of individual debtors. 2 A “significant portion” of Chapter 13 claims are never filed, resulting in millions of dollars that otherwise would be distributed to creditors to go elsewhere—an “astonishing” and “baffling” result. 1 KEITH M. LUNDIN, CHAPTER 13 BANKRUPTCY § 67.1 (3d ed. 2000 & Supp. 2004). This phenomenon is not just limited to unsophisticated creditors or inexperienced bankruptcy lawyers. See, e.g., Paul J. Maselli, When Is it Never Too Late to File a Proof of Claim?, 98 COM. L.J. 304, 305 (1993) (“One might expect that it is only the relatively unsophisticated creditor, or the creditor’s attorney who does not specialize in bankruptcy, who fails to timely file a proof of claim . . . [yet] [s]urprisingly, a substantial body of case law exists which manifests the frequency of this occurrence among sophisticated creditors and experienced bankruptcy practitioners.”). 3 See 11 U.S.C. §§ 501-502 (2000). 4 See infra Part II.A (discussing the formal proof of claim filing requirement). 5 See infra Part I.C (discussing the “bar date”). 6 As will be discussed infra note 63, under section 501(c) of the Bankruptcy Code such creditors still might have a claim filed on their behalf by either the debtor or the trustee. 11 U.S.C. § 501(c).

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claim.7 Yet this apparently straightforward application of the statute has been accused of being overly harsh and formalistic,8 in the face of apparently non-uniform and unfair treatment of creditors.9 In response, courts have created an exception to the general rule, whereby a less exacting standard applies in determining what may qualify as proof of a creditor’s claim, by allowing for so-called “informal” proofs of claim.10 However, despite this well-intentioned response,11 allowing such “informal” proofs of claim has consequently burdened the courts with fact-intensive litigation over the question of what exactly constitutes an “informal” proof of claim.12 Despite numerous amendments to the Bankruptcy Code (Code) and the Federal Rules of Bankruptcy Procedure (Rules), courts have struggled to achieve uniform and consistent results in applying the proof of claim rules.13

These approaches to proofs of claim in Chapter 13, however, overlook the possibility that a separate mechanism might be employed to facilitate the proof of claim process. At the outset of a case, a Chapter 13 debtor is required by statute, and indeed has strong incentives, to acknowledge all claims that creditors hold against the debtor.14 As a result, these acknowledgments are amenable to serving as proof of Chapter 13 creditors’ claims. This Note thus proposes that courts should formally treat Chapter 13 debtors’ statutorily-mandated acknowledgments of the claims against them as formal proof of creditors’ claims, and argues that such an approach would eliminate needless formalism, increase fairness, yield greater uniformity, and decrease litigation in Chapter 13 cases.15 Additionally, such an 7 1 LUNDIN, supra note 2, § 67.1. 8 1 GRANT GILMORE & DAVID GRAY CARLSON, GILMORE & CARLSON ON SECURED LENDING: CLAIMS IN BANKRUPTCY § 14.04, at 953 (2d ed. 2000) (referring to such a filing in some circumstances as “obviously superfluous”). 9 See infra Part II.A-B (discussing the impact that strict adherence to the proof of claim rules has on creditors). 10 See infra Parts II.B, II.B.1 (discussing the informal proof of claim doctrine, and the various standards that courts use in defining an informal proof of claim). 11 The informal proof of claim doctrine arose out of concerns that strict enforcement of the claims bar date would yield inequitable results. See In re Scott, 227 B.R. 832 (Bankr. S.D. Ind. 1998); In re Houbigant, Inc., 190 B.R. 185, 187 (Bankr. S.D.N.Y. 1995) (“The informal proof of claim is an equitable principle developed by courts to alleviate the harsh results of strict enforcement of the bar date.”). 12 See infra Part II.B.1 (discussing the highly disparate factual scenarios under which informal proof of claim issues arise). 13 See 1 GILMORE & CARLSON, supra note 8, § 14.01 (“A vexatious body of law has grown up with regard to filing proofs of claims in bankruptcy.”). 14 11 U.S.C. § 521(a)(1) (2000) (“The debtor shall file (A) a list of creditors; and (B) unless the court orders otherwise (i) a schedule of assets and liabilities.”). See infra Part III for a discussion of the incentives that compel a debtor to acknowledge all known claims in its submissions, and the consequences of failing to do so. This Note does not address the separate question that occasionally arises when creditors lack notice altogether of a debtor’s bankruptcy case. See infra note 153 for more on this issue. 15 As will be discussed infra Part IV.C, treating debtors’ acknowledgments of creditors’

2006] PROOF OF CLAIM IN CHAPTER 13 513

approach would adhere more closely to the view that confirmed Chapter 13 plans have res judicata effect.16

Part I of this Note presents some background information on Congress’ goals in creating and amending the Bankruptcy Code, and discusses the chronology and procedures in a Chapter 13 reorganization case—in particular, the procedural requirements for filing a Chapter 13 proof of claim. Part II analyzes the two approaches courts have followed in dealing with Chapter 13 proof of claim issues: the general “formal” proof of claim statutory requirement, and the judicially-created “informal” proof of claim exception.17 This section then discusses problems inherent in each approach—namely, the curious non-uniform treatment of “partially-secured” creditors,18 the “special”19 Chapter 13 problem of plans that are confirmed before the “bar date,”20 and the significant amount of litigation regarding “informal” proofs of claim.21 Part III sets forth the proposal stated above, and responds to concerns that debtor-initiated acknowledgments of creditors’ claims might induce inappropriate incentives on the part of debtors. Part IV argues on policy grounds that the proposed approach would improve upon the general “formal” rule and the “informal” exception by successfully addressing the problems observed in Part II. Finally, Part V presents a doctrinal justification in support of the proposed approach—the res judicata effect of confirmed plans of reorganization.

I. THE BANKRUPTCY CODE: PURPOSES, CHAPTER 13 PROCEDURES, AND

FILING OF PROOFS OF CLAIM IN CHAPTER 13

A. Goals of the Bankruptcy Code The Bankruptcy Code has as its two primary goals “to convert the

estate of the [debtor] into cash and distribute it among creditors,” and

claims as formal, as opposed to informal, proof of such claims strengthens the argument that adopting the proposed approach will decrease litigation in Chapter 13 cases. 16 See infra Part V (discussing the res judicata effect of confirming a Chapter 13 plan). 17 As will be discussed infra Part II.B-C, the “formal” proof of claim rule is widely accepted as a straightforward application of the Code, and the variety of application of these rules mostly applies to the “informal” proof of claim doctrine. However, the apparent simplicity of the formal proof of claim rule is mitigated by other problems addressed infra in Part II.A. 18 See infra Part II.A.1. 19 1 GILMORE & CARLSON, supra note 8, § 14.04, at 953; see infra Part II.A.2. 20 1 GILMORE & CARLSON, supra note 8, § 14.04, at 953; see infra Part II.A.2. 21 See infra Part II.B.1. As will be shown infra Part II, the partially-secured creditor problem and the bar date problem arise as a result of the statutory framework that sets forth the formal filing requirement, and the informal proof of claim litigation problem arises as a result of the various factual settings and jurisdictionally-diverse applications of the informal proof of claim doctrine.


“then to give the [debtor] a fresh start with such . . . rights as the statute left untouched.”22 Additionally, the Code should be administered economically, efficiently, and uniformly.23 Administrative costs, inefficiencies, and a lack of uniform treatment of debtors and creditors were among the conditions that prompted Congress in 1970 to create a commission to study the federal bankruptcy laws.24 The legislative history of Chapter 13 indicates that Congress intended to preserve the voluntary nature of repayment plans created under Chapter 13,25 and to simplify Chapter 13 procedures as a means to improve debtor relief and creditor recoveries.26

B. Chapter 13 Reorganization: Chronology and Procedure An individual bankruptcy process begins with a decision by the

potential debtor as to which chapter of the Code the debtor should file under.27 Individual debtors can file under Chapter 7 of the Code, which 22 Burlingham v. Crouse, 228 U.S. 459, 473 (1913); see also Kuehner v. Irving Trust Co., 299 U.S. 445, 451 (1937) (citing as a goal of the Code the “equitable distribution of the debtor’s assets amongst his creditors”); Williams v. U.S. Fid. & Guar. Co., 236 U.S. 549, 554-55 (1915) (citing as a goal of the Code to “relieve the honest debtor from the weight of oppressive indebtedness . . . to permit [the debtor] to start afresh . . . .”). 23 See REP. OF THE COMM. ON THE BANKRUPTCY LAWS OF THE U.S., H.R. DOC. NO. 93-137, pt. 1, at 2-4 (1973) (citing “[a]dministrative costs, [d]elays, and [i]nefficiencies” and a “[l]ack of [u]niformity” among the problems with the Bankruptcy Code that Congress needed to rectify); see also 1 NORTON BANKRUPTCY LAW & PRACTICE § 2:2 (2d ed. 2004) [hereinafter NORTON]. These goals of uniform treatment by, and efficient administration of, the Bankruptcy Code are of particular relevance to the thesis presented in this Note, i.e., that at least part of the reasons for allowing debtor-initiated filings to serve as proof of creditors’ claims is the more uniform treatment of creditors and a decrease in litigation surrounding so-called “informal” proofs of claim. See infra Parts III.A, III.C. 24 See H.R. DOC. NO. 93-137. The Commission Report distinguished between “external” and “internal” goals of the bankruptcy process. Stating that the “open credit economy” refers to the role of private credit generally in the United States economy, the Report cited as a primary “external” goal of the bankruptcy system the “law-based orderliness of the open credit economy in the event of the debtor’s inability or unwillingness generally to pay his debts . . . .” Id. at 74. The Report identified as “internal” goals of the bankruptcy system: (1) open access of both debtor and creditor to the bankruptcy process; (2) fair and equitable treatment of creditors’ claims; (3) rehabilitation of debtors; (4) efficient and economical case administration; (5) deterrence and sanctions against fraud and other dishonest conduct; and (6) production of information concerning the outcomes and effects of bankruptcy cases. Id. at 75-83; see also 1 NORTON, supra note 23, § 2.2. 25 H.R. REP. NO. 95-595, at 120 (1977) (“As under current law, chapter 13 is completely voluntary. This Committee firmly rejected the idea of involuntary Chapter XIII in the 90th Congress.”) (footnotes omitted); see also 8 COLLIER ON BANKRUPTCY ¶ 1300.02 (Lawrence P. King et al. eds., 15th rev. ed. 2005). 26 See H.R. REP. NO. 95-595, at 117-18 (“The [1978 amendments to the Bankruptcy Code] simplif[y] . . . plans for Individuals with Regular Income . . . .”); see also 8 COLLIER ON BANKRUPTCY , supra note 25, ¶ 1300.02. 27 For individuals facing financial insolvency, filing for bankruptcy should generally be a last-resort option. H.R. REP. NO. 95-595, at 118 (“The premises of the bill with respect to


provides for liquidation of their assets.28 Alternatively, an individual can seek to “reorganize” under Chapter 13.29 Known initially as the “wage earner’s” bankruptcy law, Chapter 13 permits any individual with regular income to become a debtor if that person meets certain eligibility requirements.30 Chapter 13 is designed, under the protection of the court, to facilitate adjustments of all types of debts of individuals with regular income through plans funded out of the debtor’s future income.31

In order to initiate a Chapter 13 case, a debtor must file a petition with the Bankruptcy Court.32 As soon as the debtor files this petition, consumer bankruptcy [include] that use of the bankruptcy law should be a last resort . . . .”); 1 LUNDIN, supra note 2, § 3.1 (“Chapter 13 is not the appropriate solution for the consumer debtor who just needs a breather from collection pressures. It is often possible to get control of the debtor’s finances without a bankruptcy petition.”). See id. for a discussion of the options debtors have at their disposal as an alternative to filing for bankruptcy. One problem in the Chapter 13 context that often prevents debtors from availing themselves of these options is that individual debtors generally only seek out legal counsel when they are “one step from financial Armageddon,” e.g., on the eve of a foreclosure sale on the debtor’s home, or after the debtor’s car has been repossessed. Id. 28 Chapter 7 is commonly known as “straight bankruptcy,” and is a form of relief afforded by the bankruptcy laws that involves the “collection, liquidation, and distribution of the nonexempt property of the debtor.” 6 COLLIER ON BANKRUPTCY, supra note 25, ¶ 700.01. If there is a significant amount of nonexempt property in the estate, the U.S. Trustee overseeing management of the case must take possession of that property and convert it to cash, normally by public or private sale. 11 U.S.C. §§ 544-554, 724(a) (2000); 6 COLLIER ON BANKRUPTCY, supra note 25, ¶ 700.04. 29 Chapter 13, while officially titled “Adjustment of Debts of an Individual with Regular Income,” shares many similarities with Chapter 11, which is titled “Reorganization,” and which focuses on adjustment of debts of business debtors. 7, 8 COLLIER ON BANKRUPTCY, supra note 25, ¶¶ 1100.01, 1300.01. Unlike in Chapter 7, a debtor’s payments in Chapter 13 are generally made primarily from the debtor’s income rather than assets—hence the distinction between liquidation and reorganization. 8 COLLIER ON BANKRUPTCY, supra note 25, ¶ 1300.01. But see 11 U.S.C. § 1322(b)(8) (providing for liquidation of property in Chapter 13). 30 See 11 U.S.C. § 101(30); HON. W. HOMER DRAKE, JR., BANKRUPTCY PRACTICE FOR THE GENERAL PRACTITIONER § 13:1 (2005) (“While prior law limited Chapter XIII [the predecessor to the current Chapter 13] relief to wage earners only, the Code permits any individual with regular income to become a debtor if [that debtor meets the eligibility requirements listed at 11 U.S.C. § 101(30)].”). See infra note 32 for a discussion of Chapter 13’s other eligibility requirements under 11 U.S.C. § 101(30). 31 See 8 COLLIER ON BANKRUPTCY, supra note 25, ¶ 1300.02. 32 FED. R. BANKR. P. 1002; 1 LUNDIN, supra note 2, § 34.2 (“The only document required by statute to commence a Chapter 13 case is a petition.”). To be an eligible debtor in Chapter 13, the petitioner must also meet certain criteria. Under 11 U.S.C. § 101(30), a Chapter 13 petitioner must be an “individual” with income “sufficiently regular and stable” to make payments under a Chapter 13 plan. The “individual” requirement “excludes partnerships and corporations from eligibility for Chapter 13.” 1 LUNDIN, supra note 2, § 2.1. The “sufficiently regular and stable” income requirement of § 101(30) exists because, “[n]otwithstanding a sincere desire to repay claim holders and the unattractiveness of alternatives, some debtors simply do not have sufficient income to fund a Chapter 13 plan.” 1 LUNDIN, supra note 2, § 3.3. Along with § 101(30), § 109(e) mandates that Chapter 13 individuals’ debts as of the date of the filing of the petition may not exceed the debt limitations prescribed in the Code. 11 U.S.C. § 109(e). The ceiling is adjusted upwards on April 1st every three years to adjust for inflation. 11 U.S.C. § 104(b). In 2005, the maximum amount of “noncontingent, liquidated, unsecured debts” that a Chapter 13


the “automatic stay” is invoked pursuant to section 362,33 under which creditors34 are immediately barred from taking further action to force their claims to be paid, pending the outcome of the newly-filed bankruptcy proceeding.35 Once the petition is filed, the court appoints a U.S. Trustee to oversee management of the case.36 It is the trustee to whom payments are made by the debtor, and from whom disbursements are received by the creditors.37 Either concurrently with the petition, or within fifteen days thereafter, the Code and the Rules require a Chapter 13 debtor to file certain documents relating to the debtor’s financial situation. Among these documents are a list of its creditors and a schedule of its assets and liabilities.38 The Code and Rules also require the debtor to file a “plan.”39 This proposed plan, commonly known as debtor filing after April 1, 2004 may have is $307,675, and the maximum amount of “noncontingent, liquidated, secured debts” is $922,975. 11 U.S.C. § 109(e); 1 LUNDIN, supra note 2, § 11.1. These debt limitations are the “principal gatekeepers for access to Chapter 13.” 1 LUNDIN, supra note 2, § 11.1. Finally, § 109(g) bars an individual from filing for Chapter 13 bankruptcy if that individual was a debtor in a prior bankruptcy case that was dismissed within 180 days of the filing of the petition. 1 LUNDIN, supra note 2, § 5.1. See id. for a summary of these eligibility requirements. 33 11 U.S.C. § 362. 34 BLACK’S LAW DICTIONARY 160 (2d pocket ed. 2001) (defining “creditor” in the context of bankruptcy as “[a] person or entity having a claim against the debtor predating the order for relief concerning the debtor”). The Code distinguishes creditors in terms of the status of the claims they hold against the debtor: secured or unsecured. For the purposes of “allowance,” discussed infra Part I.C, a creditor holds a secured claim to the extent of the value of the collateral for the underlying debt. 11 U.S.C. § 506(a); 1 LUNDIN, supra note 2, § 14.1. Section 506, titled “Determination of Secured Status,” prescribes the method by which secured claims are to be valued. A creditor holds an unsecured claim to the extent that there is no security or collateral for a debt and no right of setoff. 11 U.S.C. § 506(a); 2 LUNDIN, supra note 2, § 148.2. Examples of unsecured claims include “[s]ignature notes, most credit card debt, hospital bills, utility bills, . . . , church pledges, . . . [and] educational loans.” 2 LUNDIN, supra note 2, § 148.2. 35 See 11 U.S.C. § 362(a); Edward J. Graber & Albert J. Mogavero, Primer for Chapter 13: Part II, N.Y. ST. B.J., Jan. 1996, at 36, 36 (1996) (“First and foremost, the debtor(s) will receive immediate relief from creditors by the automatic imposition of the ‘stay’ pursuant to section 362 of the Bankruptcy Code . . . . The ‘stay’ prevents all creditors from taking or continuing any normal state court collection remedies against the debtor(s). [. . .] Of prime importance for many debtors is the protection the ‘stay’ affords against foreclosure. [. . .] All foreclosure proceedings . . . are suspended during the pendency of the Chapter 13 plan.”). 36 See 11 U.S.C. § 1302. 37 See 11 U.S.C. § 1302(b). 38 11 U.S.C. § 521(a)(1)(A)-(B) and Federal Rule of Bankruptcy Procedure 1007(a) require the debtor to file “a list of creditors,” “a schedule of assets and liabilities,” “a schedule of current income and current expenditures,” and “a statement of the debtor’s financial affairs.” The debtor must adhere to Official Bankruptcy Forms 6 and 7 in filling out this information. 1 LUNDIN, supra note 2, § 35.1. In particular, Schedule D to Official Bankruptcy Form 6 requires the debtor to list all creditors holding secured claims. Id. at 35-6. Schedules E and F to Official Bankruptcy Form 6 require the debtor to list all creditors holding unsecured priority and unsecured nonpriority claims. Id. § 35.6, at 35-8; § 35.7, at 35-10. If the debtor does not file a schedule of liabilities as required by Rule 1007(a)(1) concurrently with the petition, the debtor must at the very least file “a list containing the name and address of each creditor” with the petition. FED. R. BANKR. P. 1007(a)(1); 1 LUNDIN, supra note 2, § 34.3, at 34-8. 39 11 U.S.C. § 1321 and Federal Rule of Bankruptcy Procedure 3015 require the debtor to “file a plan.” Section 1322 is the main source for determining the elements of a plan; however,


the “plan of reorganization,”40 is just what it sounds like: the debtor proposes a plan to pay off its debts to its creditors. As will be discussed in Part III, these documents form the basis of the proposal argued for in this Note, i.e., that the debtor’s statutorily-mandated acknowledgments of creditors’ claims can, and should, serve as proof of those claims.

At this point, the trustee sends a notice to every creditor listed by the debtor in its schedule of assets and liabilities and its proposed plan.41 This notice sets the date, time, and location of a meeting of the creditors,42 and also contains a summary of the debtor’s proposed plan of reorganization.43 The notice must be received by creditors at least twenty days before the meeting of creditors occurs,44 and the meeting must occur between twenty and fifty days after the section 362 “automatic stay” order.45 Once creditors are notified of the Chapter 13 proceeding, they begin the process of filing proof of their claims with the court.46

After time for objections by creditors,47 the court confirms the proposed plan.48 The terms of a confirmed plan are binding on both creditors and debtors,49 and in Chapter 13, plan confirmation often because there is no official form for a plan, jurisdictions vary with regard to what the elements are that constitute a valid plan. See In re Fernandez, 227 B.R. 174 (B.A.P. 9th Cir. 1998) (dismissal of a debtor’s plan was proper where the plan failed to meet the three elements required by § 1322 of the Code); In re Eury, 11 B.R. 397 (Bankr. N.D. Ga. 1981) (plan is sufficient where it provides the amount to be paid, the duration of payments, and a list of creditors); 1 LUNDIN, supra note 2, § 55.1; 2 LUNDIN, supra note 2, § 96.3. In keeping with the voluntary nature of Chapter 13 cases, see infra note 150, only the debtor may file a plan. 1 LUNDIN, supra note 2, § 55.1. 40 See 11 U.S.C. § 362(d)(3)(A). 41 FED. R. BANKR. P. 2002, 3015(d). 42 11 U.S.C. § 341. As will be discussed infra Part I.C, the date contained in this notice is the “first date set for the meeting of creditors” referred to in Federal Rule of Bankruptcy Procedure 3002(c). See 1 LUNDIN, supra note 2, § 42.1 for a discussion of the timing and procedure related to the section 341 meeting of creditors. 43 Graber & Mogavero, supra note 35, at 37 (“The summary . . . usually contains the debtor’s proposed plan payment, the percentage repayment to unsecured creditors, the total debt scheduled and any proposed special treatment of specific claims.”). 44 FED. R. BANKR. P. 2002(a). 45 FED. R. BANKR. P. 2003(a). 46 This process is discussed in greater detail infra Part I.C. 47 11 U.S.C. § 1324. 48 See id. (“After notice the court shall hold a hearing on confirmation of the plan. A party in interest may object to confirmation of the plan.”). After conducting the section 1324 hearing, the court is required to confirm a Chapter 13 debtor’s proposed plan if it meets all the criteria for confirmation listed in section 1325(a), except as provided in section 1325(b). 11 U.S.C. § 1325(a)-(b); 8 COLLIER ON BANKRUPTCY, supra note 25, ¶ 1325.01. Confirmation of a plan cannot occur until at least twenty-five days from the date the creditors receive the notice of the creditors’ meeting. FED. R. BANKR. P. 2002(b); see also 3 LUNDIN, supra note 2, § 229.1. 49 11 U.S.C. § 1327(a). See 3 LUNDIN, supra note 2, §§ 229.1-231.1, for a discussion of the three main effects of confirmation under the Code: the “binding” effect, the “vesting” effect, and the “free and clear” effect. 11 U.S.C. § 1327(a)-(c). In the context of secured claimholders, discussed supra note 34, courts are split on whether, in the absence of a filed claim, the lien rights of a secured claimholder can be “lost or altered by the effects of confirmation under section 1327,” or if the “failure of a secured claim holder to file a proof of claim does not affect the


occurs at the same time as the creditors’ meeting.50 The trustee begins to pay distributions to creditors as soon as practicable after confirmation of a plan.51 Once payments to creditors included in the confirmed plan begin, the debtor, the trustee, or certain creditors can seek to modify the terms of the plan.52 Eventually, over three to five years—the typical life span of Chapter 13 cases53—the debtor completes payments to the trustee pursuant to the plan, and discharge occurs.54

C. Proofs of Claim, “Allowance,” and Timeliness in Chapter 13

In the midst of the events laid out above is the “proof of claim”

filing process.55 As stated in the Rules, a “proof of claim is a written statement setting forth a creditor’s claim,” that must be “executed by the creditor or the creditor’s . . . agent.”56 Filing a proof of claim is the way in which creditors notice their intent to assert their claims against a

validity of the creditor’s lien [outside the context of the plan].” 4 LUNDIN, supra note 2, § 288.1. 50 See 1 LUNDIN, supra note 2, § 42.1 (“In many districts, the meeting of creditors is also the date on which a confirmation order is entered and distributions begin in Chapter 13 cases . . . .”). 51 11 U.S.C. § 1326(a)(2). As will be discussed in greater detail infra Part III.B, the practice of confirming plans at the time the creditors’ meeting occurs, coupled with the binding effect of plan confirmation, creates a tension between the need for efficient disbursement of payments to creditors already included in the confirmed plan, and the rights of creditors who have not yet filed their proofs of claim but who are not obligated to do so until the so-called “bar date” arrives. 52 11 U.S.C. § 1329(a). See infra Part I.C for a discussion of what an “allowed” claimholder is, and see supra note 34 for a discussion of the distinction between secured and unsecured claims. 53 The length of time it takes to complete a Chapter 13 plan was recently changed by the 2005 amendments to the Bankruptcy Code. If a debtor is not proposing to pay off 100% of its “allowed” unsecured claims, and if either (i) the trustee, or (ii) an unsecured claimholder whose claim the debtor is not proposing to fully pay off, objects to the proposed plan, then the amended section 1325(b)(4) applies. 11 U.S.C.A. § 1325(b)(4) (2006) (added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 92); 8 COLLIER ON BANKRUPTCY, supra note 25, ¶ 1325.08. That provision effectively sets the length of a Chapter 13 plan at three years if the “current monthly income” of the “debtor and the debtor’s spouse combined” falls short of the state median income applicable to the debtor’s household. 11 U.S.C. § 1325(b)(4). If instead the “current monthly income” of the “debtor and the debtor’s spouse combined” exceeds the state median income applicable to the debtor’s household, then the plan can take as long as five years. Id.; see also 8 COLLIER ON BANKRUPTCY, supra note 25, ¶ 1325.08. Chapter 13 trustees and unsecured claimholders are not required to demand a five-year plan from a debtor whose current monthly income falls into the latter category. 8 COLLIER ON BANKRUPTCY, supra note 25, ¶ 1325.08. 54 11 U.S.C. § 1328(a) (2000); 4 LUNDIN, supra note 2, § 343.1 (“‘As soon as practicable after completion by the debtor of all payments under the plan,’ the court ‘shall’ grant the debtor a discharge.”). See 1 GILMORE & CARLSON, supra note 8, § 14.04, at 948 n.9 for a discussion of some exceptions to this rule. 55 11 U.S.C. § 501; FED. R. BANKR. P. 3001. 56 FED. R. BANKR. P. 3001(a)-(b). A proof of claim must generally conform to Official Form 10, and should be accompanied by supporting documentation of the claim to improve administration of the case. 2 NORTON, supra note 23, § 41.5.


debtor.57 Under the Code and Rules, creditors cannot receive disbursements under the terms of a confirmed plan unless their claims are deemed “allowed.”58 However, in order for a claim to be “allowed,” section 502 mandates that a proof of claim must be “timely filed.”59 Thus, only creditors whose proof of claim is “timely filed” can be paid under the terms of a confirmed Chapter 13 plan.60 The timeliness of a proof of claim, in turn, is dictated by Rule 3002.61 Rule 3002(c) states that a proof of claim is timely filed if it is filed “not later than ninety days” after the first date set for the meeting of creditors called under section 341(a) of the Code.62 This date—the first date set for the meeting of creditors plus ninety days—is commonly known as the “bar date.”63 Thus, although 501 permits, but does not require, the filing of proof of a creditor’s claim,64 failing to file a proof of claim—or failing to have one filed on the creditor’s behalf65—can lead to serious consequences for a claim.66 The net result of jumping through this series of statutory hoops is that, with the exception of claims filed by

57 Maselli, supra note 2, at 304 (“Bankruptcy is an event . . . in which all creditors are invited to participate. A creditor must, however, accept that invitation by filing proof of its claim with the clerk of the bankruptcy court.”). 58 11 U.S.C. § 502; FED. R. BANKR. P. 3021 (once a plan is confirmed, “distribution shall be made to creditors whose claims have been allowed”); see also 4 LUNDIN, supra note 2, § 288.1 (“[a]llowance is prerequisite to the payment of claims through the Chapter 13 plan”). 59 11 U.S.C. § 502. Specifically, § 502(b)(9) states that when a proof of claim is not timely filed, it is not “allowed.” As will be discussed infra Part III.A, however, the Code is not clear as to whether this rule applies to secured creditors. 60 11 U.S.C. § 502. 61 FED. R. BANKR. P. 3002. 62 FED. R. BANKR. P. 3002(c). For creditors that are governmental units, e.g. taxing authorities such as the I.R.S., this deadline extends to 180 days after the first date set for the meeting of creditors. FED. R. BANKR. P. 3002(c)(1). See generally FED. R. BANKR. P. 3002(c)(1)-(5) for the exceptions to this rule. This Note restricts its discussion to the more common 90-day deadline applied to most creditors. 63 See 1 GILMORE & CARLSON, supra note 8, § 14.01, at 929. Under section 501(c), the debtor or the trustee may file proof of a creditor’s claim on his behalf, if that creditor has failed to file before the bar date. 11 U.S.C. § 501(c). Specifically, under Rule 3004, the debtor or trustee has thirty days after expiration of the ninety-day bar date within which to file proof of a creditor’s claim on behalf of that creditor. FED. R. BANKR. P. 3004. Thus, if a creditor does not file a proof of claim before the bar date, that claim is still deemed to be “allowed” if the debtor or the trustee files the proof of claim on the creditor’s behalf within thirty days after the bar date. Although it may seem counter-intuitive that a debtor might file a proof of claim on behalf of a creditor, there are numerous reasons why a debtor might do so, e.g., the debtor may want to file proof of a secured claimholder’s claim, lest the holder of the security interest miss out on the Chapter 13 bankruptcy proceeding and foreclose outside of bankruptcy for the full amount of the debt. 1 GILMORE & CARLSON, supra note 8, § 14.04, at 947. 64 11 U.S.C. § 501 (“A creditor or an indenture trustee may file a proof of claim.”) (emphasis added). 65 11 U.S.C. § 501(c); see supra note 63. 66 In re Baldridge, 232 B.R. 394, 396 (Bankr. N.D. Ind. 1999) (“No one is ever required to file a proof of claim in any bankruptcy proceeding; it is just that not doing so has consequences . . . .”).


the debtor or trustee on behalf of a creditor,67 any creditors who file proof of their claims after the bar date will not receive disbursements under the Chapter 13 plan.68

Thus, assume a hypothetical debtor D files a Chapter 13 bankruptcy petition with the court on Day 1, which is the same day on which the court issued the section 362 automatic stay order. By Day 15, D must file a proposed plan of reorganization with the court.69 The trustee then notifies all of D’s creditors that D listed in its proposed plan of the meeting, which must occur some time between Day 20 and Day 50—i.e., twenty to fifty days after the automatic stay order. Factoring in the required minimum of twenty days notice to the creditors of the meeting, assume the trustee initially set the date of the meeting at Day 45. Any creditors that attempt to file proof of their claims after the bar date of Day 135 (i.e., ninety days after the date first set for the meeting of creditors) are deemed not to have timely filed their claims.70 As a result, their claims are deemed not to be “allowed,”71 and are thus barred from participation in the plan.72

Within the context of this complex statutory framework, courts have interpreted these statutory provisions and have applied judge-made rules in an effort to resolve the question of what may qualify as a proof of claim in Chapter 13.

67 See 11 U.S.C. § 501(c); supra note 63. 68 See 1 LUNDIN, supra note 2, § 67.1 (“Failure to file before the claims bar date forfeits the creditor’s rights to distributions from the trustee.”). However, as will be argued infra Part II.A.2, even filing proof of claim before the bar date may not be enough for Chapter 13 creditors to successfully receive disbursements from a confirmed Chapter 13 plan. This is due to the problem, unique to Chapter 13, of plans often being confirmed when the creditors’ meeting occurs, before the bar date even arrives. In such a situation, the trustee may assert that the proof of claim filed after plan confirmation was not timely filed, and hence not allowed, and will rely on Rule 3021 to refuse payment to such creditors—even if those creditors’ claims are already acknowledged in the confirmed plan. 1 GILMORE & CARLSON, supra note 8, § 14.04, at 946-47 (“If the plan is confirmed according to its own terms, then the trustee . . . may be asked to pay out on claims for which proofs of claim have [not yet] been filed. Yet [Rule 3021] require[s] that only allowed claims are entitled to distributions. Trustees therefore like to assert that [such claims] are not ‘allowed,’ and therefore are not entitled to distributions.”). This issue is addressed infra Part IV.B, as another reason in favor of adopting debtor-filed submissions as proof of creditors’ claims. 69 11 U.S.C. § 1321; FED. R. BANKR. P. 3015. 70 FED. R. BANKR. P. 3002(c). 71 11 U.S.C. § 502. 72 Unless, of course, D or the trustee files on the creditor’s behalf pursuant to section 501(c), in which case D or the trustee would have until June 15—i.e., thirty days after the bar date—to file for the creditor. 11 U.S.C. § 501(c); see supra note 63. See generally 5 NORTON, supra note 23, app. A, for a helpful flowchart depicting the chronology of events in a Chapter 13 case.


II. ANALYSIS OF THE “FORMAL” AND “INFORMAL” APPROACHES TO DETERMINING WHAT QUALIFIES AS A CHAPTER 13 PROOF OF CLAIM

A. The Formal Proof of Claim Filing Requirement As just explained, the default rule in Chapter 13 requires creditors

to formally file proof of their claims before the bar date as a prerequisite to receiving payments under a confirmed plan.73 This default rule is known as the “formal” proof of claim requirement.74 Thus, again, according to the hypothetical timeline above, given a bar date of Day 135, any proofs of claim filed after that date are not “allowed,” and will be excluded from the debtor’s plan of reorganization.75

The primary ground on which courts justify the formal proof of claim filing requirement is the argument that such a requirement ensures that “all those involved in the proceeding will be made aware of the claims against the debtor’s estate.”76 Thus, proponents of the formal filing requirement assert that forcing creditors to file proof of their claims achieves section 501’s “primary objective . . . [of] keep[ing] everyone informed.”77 Courts also argue that requiring creditors to file proof of their claims on or before the bar date provides a measure of finality to the claims filing process, providing for “orderly administration of the bankruptcy case.”78

The formal filing requirement outlined in this section is susceptible

73 See supra Part I.C. 74 Although sections 501 and 502 do not refer to the proof of claim filing requirement as a “formal” requirement, the term has nonetheless come to refer to the statute, probably as a method of contrasting it with the “informal” proof of claim doctrine, discussed infra Part II.B. See 4 COLLIER ON BANKRUPTCY, supra note 25, ¶ 501.01 (referring to section 501 as requiring the filing of a “formal proof of claim”). 75 This analysis, of course, presumes that the bar date arrives before the plan is confirmed. As will be discussed infra Part II.A.2, this is often not the case in Chapter 13. In re Rolyn, 266 B.R. 453 (Bankr. N.D. Cal. 2001), exemplifies the formal proof of claim requirement. In Rolyn, the bar date for filing proofs of claim was October 17, 2000. The Chapter 13 creditor filed a proof of claim with the court on October 20. The court thus held that the creditor’s proof of claim was untimely, and denied admission of the creditor’s claim. Id. at 455; see also In re Reichenbach, No. 03-03148, 2004 WL 1718090, at *3 (Bankr. N.D. Iowa May 5, 2004) (stating that creditor’s secured claim of $61,337.41, arising from a lien on debtor’s pickup truck, household furnishings, and clothing items, was deemed not to be “allowed,” because “[n]o formal proof of claim was filed before the bar date”). 76 In re PCH Assocs., 949 F.2d 585, 605 (2d Cir. 1991); see also 4 COLLIER ON BANKRUPTCY, supra note 25, ¶ 501.01. Although PCH Associates arose in the context of a Chapter 11 proceeding, section 501’s formal filing requirement applies equally to Chapter 11 and to Chapter 13 cases. 11 U.S.C. § 501. 77 In re PCH Assocs., 949 F.2d at 605. 78 See Maselli, supra note 2, at 306. The approach proposed by this Note refutes the “keeping everyone informed” justification as extraneous, on the theory that at least with respect to creditors that the debtor has acknowledged it owes debts to, requiring such creditors to formally file proof of their claims would be redundant.


to attack on a number of fronts. The first deals with the non-uniform treatment of creditors holding partially-secured claims, and the second stems from the unique Chapter 13 problem of plans confirmed before the bar date.

1. The Partially-Secured Creditor Problem

The formal filing requirement needlessly complicates the duties of

creditors holding both secured79 and unsecured80 claims, and treats such creditors in a non-uniform fashion. A creditor holds a partially-secured claim when the value of the property securing the claim is less than the amount of the claim.81 Thus, in the context of the Code, a creditor to whom the debtor owes a $100,000 debt secured by a parcel of real estate worth $75,000 really holds two claims—a $25,000 unsecured claim and a $75,000 secured claim.82 In contrast to the requirement of sections 501 and 502 that any creditor’s failure to timely file a proof of claim translates into that claim not being “allowed,”83 some courts are of the view that only unsecured claims must have a timely-filed proof of claim.84 These courts point to Rule 3002(a), which states that in order for an unsecured claim to be “allowed,” proof of such a claim must be filed,85 but which, conspicuously, does not require the same of secured claims.86 By implication, then, secured claims can be “allowed” notwithstanding the failure to file a proof of claim.87 Although a 79 See supra note 34 (discussing section 506’s distinction between secured and unsecured claims). 80 See id. 81 2 LUNDIN, supra note 2, § 103.3. 82 11 U.S.C. § 506 (2000); 1 LUNDIN, supra note 2, § 14.1. The process by which a partially-secured creditor’s claims are separated into one fully-secured claim, and one unsecured claim, is known as “bifurcation.” 11 U.S.C. § 506(a); see also 4 COLLIER ON BANKRUPTCY, supra note 25, ¶ 506.03 (“[S]ection 506(a) requires the bifurcation of an ostensibly secured claim into ‘secured’ and ‘unsecured’ portions if the value of the creditor’s security is less than the amount of its claim.”). Bifurcation formally occurs when the plan of reorganization is confirmed. 11 U.S.C. § 506(a); see 3 LUNDIN, supra note 2, § 253.1, at 253-4. 83 See supra Part I.C. 84 See, e.g., In re Hudson, 260 B.R. 421, 438 (Bankr. W.D. Mich. 2001) (“There is no deadline fixed by the Bankruptcy Rules within which a secured claim holder must file a proof of claim”); In re Stewart, 247 B.R. 515 (Bankr. M.D. Fla. 2000); In re Rome, 162 B.R. 872, 875 (Bankr. D. Colo. 1993). 85 FED. R. BANKR. P. 3002(a) (“An unsecured creditor . . . must file a proof of claim . . . for the claim to be allowed . . . .”) (emphasis added). 86 See id. This conflict between sections 501 and 502, and Rule 3002(a), has been discussed at length in the cases and literature. See, e.g., 4 LUNDIN, supra note 2, § 280.1, at 280-2 (observing a “lack of parallelism between . . . Rule 3002(a) and § 501 of the Code”). See generally 1 GILMORE & CARLSON, supra note 8, § 14.02 and 3 LUNDIN, supra note 2, § 280.1 for a discussion of this issue. 87 See 1 GILMORE & CARLSON, supra note 8, § 14.02, at 933 (“The implication of Rule 3002(a) is that, because only unsecured creditors are mentioned, secured creditors have


majority of courts have concluded that sections 501 and 502 must prevail,88 the question is much-litigated and not at all laid to rest.89

Thus, at least in those jurisdictions that adhere to the latter view, the formal filing requirement, as delineated by sections 501, 502, and Rule 3002, results in differential treatment of secured and unsecured claimholders that creates needlessly formalistic outcomes.90 Assume our hypothetical creditor C loaned $50,000 to D, but the collateral for that debt is only valued at $30,000, such as when, e.g., a borrower takes out a loan for a $50,000 car, but because of depreciation the car is now only worth $30,000. C is thus a partially-secured creditor, holding a secured claim valued at $30,000, and an unsecured claim valued at $20,000. The conflict between section 501 and Rule 3002(a) creates the awkward situation of requiring C to file a proof of claim on behalf of the $20,000 unsecured claim, but not requiring C to do so for its $30,000 secured claim.91

This non-uniform treatment of secured and unsecured claims is not limited to partially-secured creditors whose claims are bifurcated92 into separate secured and unsecured claims. The same issue will arise in the case of any individual creditor (C2) that happens to hold both secured and unsecured claims right from the start, as when, e.g., a bank issues a home loan to the debtor—the secured claim—and issues a credit card to

automatically “allowed” claims, even when they file no proofs.”). 88 In re Baldridge, 232 B.R. 394, 396 (Bankr. N.D. Ind. 1999) (“the majority of courts that have considered the issue have concluded that, in order to receive a distribution under a confirmed Chapter 13 plan, even secured creditors must first file a proof of claim or have one filed on their behalf”). There are strong arguments in favor of this approach. See, e.g., In re Schaffer, 173 B.R. 393 (Bankr. N.D. Ill. 1994) (“the only legitimate outcome is that for both secured and unsecured claims to be allowed, they must be filed under section 501”); In re Rogers, 57 B.R. 170 (Bankr. E.D. Tenn. 1986); 5 NORTON, supra note 23, § 123:6 (discussing In re Wells, 125 B.R. 297, 300 (Bankr. D. Colo. 1991) as standing for the proposition that although the Bankruptcy Rules do not require secured creditors to file a proof of claim in order to participate in Chapter 13 distributions, sections 1325, 502(a), and 506 “effectively create that requirement.”); 1 GILMORE & CARLSON, supra note 8, § 14.02, at 933 (“[t]o the extent the Bankruptcy Rules contradict the statute, the statute, of course, must prevail”); 4 LUNDIN, supra note 2, § 280.1, at 280-2 (referring to Rule 3002(a) as an “imperfect implementation of § 501”). 89 4 LUNDIN, supra note 2, § 280.1, at 280-2 (“The confusing language in Bankruptcy Rule 3002 and the lack of parallelism between Bankruptcy Rule 3002 and §§ 501 and 502 of the Code have led to much litigation over the consequences for the secured claimholder that fails to file a timely proof of claim”); id., § 280.1, at 280-9 (“The absence of one comprehensive definition of timely for the filing of proofs of secured claims is intolerably disruptive of Chapter 13 practice.”). 90 Confusion over the rights of a given creditor who holds both a secured and an unsecured claim is not limited to the proof of claim arena. Section 1329, which governs modification of a plan after confirmation, grants standing to seek modification of a confirmed plan to the “debtor, the trustee or the holder of an allowed unsecured claim.” 11 U.S.C. § 1329(a) (2000). This raises the question of whether a creditor holding an allowed unsecured claim has standing to seek modification with respect to that same creditor’s secured claim. See 3 LUNDIN, supra note 2, § 253.1, at 253-4. 91 11 U.S.C. §§ 501-502; FED. R. BANKR. P. 3002. 92 See supra note 82 and accompanying text.


the same debtor—the unsecured claim.93 Just as in the situation outlined above, C2 is required by the Code and Rules to file proof of its unsecured claim, but is not so required on behalf of its secured claim.94 In such a situation, C2’s actions in the Chapter 13 case with respect to filing its proofs of claims will be subject to differential requirements by the Code and Rules, depending on whether C2 is acting on behalf of its secured or unsecured claim. Thus, whether in the context of a partially-secured creditor, or more generally any single creditor holding separate claims against a debtor, the formal filing requirement requires the proof of claim filing duties of such creditors to turn merely on the secured or unsecured status of such creditor’s claims. The result is internally non-uniform treatment of such creditors that would not appear to exist for any justifiable reason.95 Additionally, such an approach undermines Congress’ goals that Chapter 13 be administered with simplicity and efficiency.96

2. The Problem of Plans Confirmed Before the Bar Date

Beyond problems of non-uniform treatment of partially-secured

claimholders, the formal filing requirement creates problems when Chapter 13 plans are confirmed before the bar date.97 As noted earlier,98 in Chapter 13 proceedings, plan confirmation often occurs soon after, if not contemporaneously with, the section 341(a) meeting of creditors. But because Chapter 13 creditors have ninety days from the date first set for the meeting of creditors before their claims are “barred,”99 Chapter 13 plans are very likely to be filed before the bar date ends100

93 Another way of thinking about this situation, as compared to the one just presented, is that instead of bifurcating a previously-uniform claim into separate claims, here the creditor has already “bifurcated” its claims into secured and unsecured classifications. 94 11 U.S.C. §§ 501-502; FED. R. BANKR. P. 3002(c). 95 While the obvious solution to this differential treatment of secured and unsecured claimholders would be to amend Rule 3002(a) to treat the two uniformly, e.g., by explicitly stating that both secured and unsecured claimholders must file a proof of claim in order to achieve “allowance” under Rule 3002(a), Congress has passed on the opportunity to do so. See 4 LUNDIN, supra note 2, § 280.1, at 280-3 to 280-4 (“Hope that the 1994 amendments to § 502(b)(9) would inspire the Bankruptcy Rules Committee to address the definition of timely for the filing of proofs of all secured claims was not realized in 1996 . . . . [T]he offending reference to only unsecured creditors in Bankruptcy Rule 3002(a) was retained. The Rules Committee missed an opportunity to clear up much unnecessary uncertainty about the timeliness of proofs of secured claims.”). 96 See supra notes 23, 36 and accompanying text. 97 See generally 1 GILMORE & CARLSON, supra note 8, § 14.04, for a discussion of the issues presented in this subsection. 98 See supra Part I.B. 99 FED. R. BANKR. P. 3002(c); see supra Part I.C. 100 1 GILMORE & CARLSON, supra note 8, § 14.04, at 946.


and might be confirmed well before the bar date,101 and creditors might file proofs of claim after the plan has already been confirmed.102 This “unique procedural feature”103 associated with the administration of Chapter 13 cases, coupled with the fact that confirmation is a binding event,104 throws creditors into an unfair situation, because the confirmed plan shuts creditors out of a Chapter 13 case even though the deadline for filing their proof of claim has not yet arrived.

Additionally, when plans are confirmed before the bar date, the formal filing requirement creates problems of needless formalism. As noted,105 the Code requires that proof of a claim be timely filed as a prerequisite to “allowance.” Yet this requirement holds even in situations where the debtor is well aware of the creditor’s claims, and has acknowledged as much in its proposed plan or in the confirmed plan itself.106 Thus, consider a scenario in which a creditor fails to file a proof of claim by the bar date, but was acknowledged in the debtor’s already-confirmed plan as the holder of a claim against the debtor.107 The trustee might assert that it need not distribute any funds to that creditor, on the grounds that the creditor failed to file a proof of claim, notwithstanding the fact the debtor’s plan itself acknowledges the

101 Id. 102 See In re Cason, 190 B.R. 917, 920 n.1 (Bankr. N.D. Ala. 1995) (asserting that one-third of Chapter 13 plans are confirmed before the bar date has arrived); 1 GILMORE & CARLSON, supra note 8, § 14.04, at 946. Despite this apparent unfairness to creditors, Congress and the courts appear to agree that it is proper to confirm Chapter 13 cases and begin payments under the plan before the claims bar date, on the theory that there are greater costs to waiting until after the bar date passes. See In re Strong, 203 B.R. 105, 113 (Bankr. N.D. Ill. 1996) (Chapter 13 plans should be confirmed before the bar date “in order to expedite case administration and get dividend distributions from the Chapter 13 Standing Trustee to the creditors as soon as possible, rather than wait for the completion of the sometimes lengthy claims objection process.”); 140 CONG. REC. H10, at 770 (statement of Rep. Brooks) (“This section clarifies Congressional intent that the trustee should commence making the payments ‘as soon as practicable’ after the confirmation of the chapter 13 plan. Such payments should be made even prior to the bar date for filing claims.”); see also 3 LUNDIN, supra note 2, § 216.1 (arguing that by delaying the confirmation process until after the bar date, “[c]reditors . . . are not being paid during this period of delay . . . [c]ars continue to depreciate while everyone waits for the confirmation hearing . . . [and] [t]he passage of time engages the bankruptcy court, debtors, and creditors in expensive, nonproductive litigation that can be avoided by reaching confirmation immediately after the meeting of creditors”). 103 1 GILMORE & CARLSON, supra note 8, § 14.04, at 946. Contra Chapter 11 bankruptcy, in which the court sets a “bar date” on its own. FED. R. BANKR. P. 3003(c)(3); 1 GILMORE & CARLSON, supra note 8, § 14.01, at 929. 104 See 11 U.S.C. § 1327(a) (2000) (“The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.”). 105 See supra Part I.C. 106 1 GILMORE & CARLSON, supra note 8, § 14.04, at 953. See infra Part III for a discussion of the incentives a debtor has to fully acknowledge creditors’ claims against it. 107 This factual scenario is taken from In re Greenig, 152 F.3d 631 (7th Cir. 1998); see 1 GILMORE & CARLSON, supra note 8, § 14.04, at 946-47.


claim.108 Because the debtor in such a situation has acknowledged the creditor’s claim, it seems strange and overly formalistic that the Code requires the creditor to file an “obviously superfluous piece of paper.”109

B. The Informal Proof of Claim Doctrine

To remedy the harshness that strict enforcement of the bar date

might yield inequitable results,110 some courts have responded to the formal filing requirement outlined above, and created the so-called “informal” proof of claim doctrine as an alternative ground upon which to accept a creditor’s proof of claim. Notwithstanding the great importance placed upon the timely filing of proofs of claim,111 and the sternly-worded advice to creditors as to the risks associated with not filing a formal proof of claim,112 as noted earlier, a significant number of creditors miss the deadline imposed by the formal filing requirement for timely filing a proof of claim.113 As a result, these creditors often attempt to invoke the “informal” proof of claim doctrine.114 Under this long-standing common law doctrine,115 creditors that have failed to timely file proof of their claims—and who are thus barred from participating in the plan’s distributions under the general rule above—can effectively meet the formal filing requirement by having their previously-filed submissions and communications with the court, the trustee, or the debtor serve as proof of claim.116 108 Id. 109 See 1 GILMORE & CARLSON, supra note 8, § 14.04, at 953. 110 See In re Houbigant, Inc., 190 B.R. 185, 187 (Bankr. S.D.N.Y. 1995) (“The informal proof of claim is an equitable principle developed by courts to alleviate the harsh results of strict enforcement of the bar date.”); In re Scott, 227 B.R. 832 (Bankr. S.D. Ind. 1998); In re WPRV-TV, 102 B.R. 234, 238 (Bankr. E.D. Okla. 1989) (“The intent of the informal Proof of Claim concept is to alleviate problems with form over substance; that is, equitably preventing the potentially devastating effect of the failure of a creditor to formally comply with the requirements of the Code in the filing of a Proof of Claim, when, in fact, pleadings filed by the party asserting the claim during the claims filing period in a bankruptcy case puts all parties on sufficient notice that a claim is asserted by a particular creditor.”). 111 See supra note 7 and accompanying text. 112 LYNN M. LOPUCKI & CHRISTOPHER R. MIRICK, STRATEGIES FOR CREDITORS IN BANKRUPTCY PROCEEDINGS § 16.07, at 767 (4th ed. 2003) (“It is dangerous for a secured creditor not to file a proof of claim.”); 1 LUNDIN, supra note 2, § 67.1 (“Probably the single most important act for a creditor in . . . [a] Chapter 13 case is to timely file a correct proof (or proofs) of claim.”). 113 See supra note 2. 114 See 4 LUNDIN, supra note 2, § 273.1. 115 See, e.g., Oaks v. Bank One Corp., 126 F. App’x 689, 692 (6th Cir. 2005) (referring to “the long-standing common law doctrine of informal proofs of claim”). 116 See 4 LUNDIN, supra note 2, § 273.1. More specifically, if the bar date has passed without the creditor filing a formal proof of claim as described in Part I.C, so long as the writing that the creditor seeks to have declared an informal proof of claim was filed before the bar date, the creditor can later file an amended formal proof of claim after the bar date that relates back to the


In courts that allow for such informal proofs of claim, the basic rule is that a claim arises where the creditor has proven its intent to assert its claim against the debtor,117 but only if such filings are sufficient to meet the definition of a formal proof of claim—a “written statement setting forth a creditor’s claim.”118 Thus, using the hypothetical timeline presented above, assume that the creditor C failed to file a formal proof of claim by the Day 135 bar date. C can petition the court for a determination on whether any documents that C had filed before the bar date were sufficient to be deemed informal proof of C’s claim. If the court agrees with C’s assertion, then despite missing the bar date, C’s claim will be deemed “allowed” and C will be eligible to receive distributions under the confirmed plan. Among the types of communications that courts have construed as valid informal proofs of claim are a confirmed Chapter 13 plan,119 an objection to plan confirmation,120 a motion to dismiss the case coupled with a motion for relief from the automatic stay,121 and a letter sent to the trustee that states the amount of the claim, the nature of the claim, and an intent to pursue the claim.122 date of the informal proof of claim, thus rendering the formal late-filed proof of claim timely. See In re Hayes, 327 B.R. 453, 460 (Bankr. C.D. Cal. 2005) (“Under [the informal proof of claim] doctrine, a timely informal proof of claim may later be amended by the filing of a formal proof of claim after the bar date.”) (citing In re Edelman, 237 B.R. 146 (B.A.P. 9th Cir. 1999)); In re Wigoda, 234 B.R. 413, 415 (Bankr. N.D. Ill. 1999) (“An informal proof of claim may . . . become the basis for an amended proof of claim.”) (citing In re Plunkett, 82 F.3d 738 (7th Cir. 1996)); see also Maselli, supra note 2, at 308. Although “nothing in the Code or Rules specifically allows for the filing of an amended proof of claim,” it is nevertheless “universally accepted” that it is within a bankruptcy court’s discretion to allow amendments to court filings, including proofs of claim, even after the bar date. Maselli, supra note 2, at 308. There are certain limitations on this power, however; specifically, amendments are allowed in order to “perfect” a previously-filed claim, but not in order to assert a novel claim against the debtor. See id at 308 n.28. 117 Wilkens v. Simon Bros., 731 F.2d 462, 465 (7th Cir. 1984) (“[A] claim arises where the creditor evidences an intent to assert its claim against the debtor.”); see also 4 LUNDIN, supra note 2, § 273.1. “Mere knowledge” of a claim’s existence by the debtor, trustee, or court is insufficient on its own to amount to an informal proof of claim. Id.; see also Wilkens, 731 F.2d at 465 (“Mere knowledge of the existence of the claim by the debtor, trustee, or bankruptcy court is insufficient.”); Wigoda, 234 B.R. at 415 (“Even though a bankruptcy court, trustee, or debtor may know of the existence of a claim, mere knowledge is not sufficient to elevate a claim to a proof of claim.”). See infra Part II.B.1 for a more detailed discussion of the various standards that courts use in defining an informal proof of claim. 118 FED. R. BANKR. P. 3001(a). 119 In re Babbin, 156 B.R. 839 (Bankr. D. Colo.), rev’d on other grounds, 160 B.R. 848 (D. Colo. 1993); see also LUNDIN, supra note 2, § 273.1. 120 In re Gonzalez, 295 B.R. 584 (Bankr. N.D. Ill. 2003); see also LUNDIN, supra note 2, § 273.1, at 273-3. 121 In re Cooper, 139 B.R. 736 (D. Colo. 1992); see also LUNDIN, supra note 2, § 273.1, at 273-4. 122 In re Haugen Constr. Servs., Inc., 876 F.2d 681 (8th Cir. 1989). Consider also In re Michels, 286 B.R. 684 (B.A.P. 8th Cir. 2002). In Michels, a creditor with a secured interest in the debtor’s real estate and farm equipment failed to file a proof of claim before the bar date. The creditor argued that it had taken action “prior to the bar date . . . that demonstrated the amount and nature of its claim and its intention to pursue that claim.” Id. at 691. An Eighth Circuit


Although intended as a method of relief from the harshness of the formal filing requirement, the informal proof of claim doctrine has spawned problems of its own, not the least of which is the issue of determining what exactly constitutes an informal proof of claim.

1. The Informal Proof of Claim Litigation Problem

One problem that arises as a result of the informal proof of claim

doctrine is that standards for informal proofs of claim vary among jurisdictions.123 Although courts are clear that an informal proof of claim must state the nature and extent of a claim, and must clearly show an intent to hold the debtor liable on the claim,124 courts apply differing standards in determining whether a creditor has met the informal proof of claim test.125 Many courts apply a five-part test to determine whether actions taken by a creditor constitute an informal proof of claim.126 Under this test, first the statement must be in writing; second, the statement must contain a demand for payment; third, the statement must express an intent to hold the debtor liable; fourth, the statement must have been filed with a bankruptcy court; and fifth, if the other four factors are met, then it must be equitable to allow the informal proof of claim.127 Other courts remove the final requirement, settling instead on a four-part test.128 Still other courts approve of a two-part test that simply requires a demand against the debtor’s estate and asserts the bankruptcy appellate panel, applying that Circuit’s standard for informal proofs of claim, held that a series of motions and filings by the creditor, when taken together, “made clear [the creditor’s] desire to have its rights dealt with in [the] [d]ebtor’s [plan of reorganization]. Id. at 692. Specifically, the court found that because the creditor had filed a response to the debtor’s motion for injunctive relief, had filed objections to confirmation of both the debtor’s original plan of reorganization and the debtor’s amended plan, and had filed a separate memorandum on legal points and authorities, that the creditor had sufficiently evidenced its intent to have its claim dealt with in the debtor’s plan. Id. As will be discussed infra Part II.B.1, the circuits vary somewhat with regard to what standard they apply in determining whether a creditor has submitted a valid informal proof of claim. 123 See Maselli, supra note 2. 124 Id. at 309. Another apparently uniform requirement for an informal proof of claim is that it be in writing. See id. at 310 (“No cases have permitted an informal proof of claim on a creditor’s mere assertion of an out-of-court verbal communication.”). 125 In re M.J. Waterman & Assocs., 227 F.3d 604, 609 (6th Cir. 2000) (“The standards used by courts varies [sic] throughout the country . . . .”); 4 LUNDIN, supra note 2, § 273.1, at 273-1 (“Some circuits require strict conformity with Official Bankruptcy Form 10 . . . [i]n other jurisdictions, courts seem to bend over backward to find some document or series of events that mimics a proof of claim.”). 126 See, e.g., M.J. Waterman, 227 F.3d 604; In re Nikoloutsos, 199 F.3d 233 (5th Cir. 2000); In re Petrucci, 256 B.R. 704 (Bankr. D.N.J. 2001); In re McCoy, 44 B.R. 215 (Bankr. W.D. Ky. 1984). 127 1 GILMORE & CARLSON, supra note 8, § 14.02, at 935. 128 See, e.g., In re Shaffner, 320 B.R. 870 (Bankr. W.D. Mich. 2005); In re Vaughn Chevrolet, Inc., 160 B.R. 316 (Bankr. E.D. Tenn. 1993).


creditor’s intention to hold the debtor liable.129 Thus, there exists a diversity of opinions as to what the proper standard is in determining whether a creditor has met the elements of an informal proof of claim.

A related, yet more taxing, problem with the informal proof of claim doctrine is that examination of whether the creditor’s previously-filed submissions should serve as an informal proof of claim is a highly fact-intensive inquiry, resulting in seemingly endless litigation on the issue.130 Irrespective of the standard in a given jurisdiction, there is no shortage of permutations of filings and events that courts have been called upon to determine whether creditors have a valid informal proof of claim.131 A letter to opposing counsel,132 a motion for relief from the automatic stay,133 an objection to plan confirmation,134 a motion to dismiss,135 undocumented verbal communication with the trustee,136 and even a letter sent to the trustee and the court expressing “irritation” over the debtor’s unpaid debts,137 have all been asserted, either alone or coupled with other documents or factors,138 as sufficient to merit a declaration that the creditor has submitted an informal proof of claim. Thus, courts have expended a great deal of effort in making the informal proof of claim determination.

Part III proposes an approach that would largely resolve these weaknesses that arise under the current Chapter 13 proof of claim approaches—non-uniform treatment of partially-secured creditors, unfairness and needless formalism that arises when plans are confirmed before the bar date, and onerous litigation over informal proofs of claim.139

129 See, e.g., In re Haugen Constr. Servs., Inc., 876 F.2d 681, 682 (8th Cir. 1989); In re Penn State Clothing Corp., 205 B.R. 62, 64 (Bankr. E.D. Pa. 1997). 130 See 4 LUNDIN, supra note 2, § 274.1 (referring to the determination of whether a plan, or a plan combined with other documents, may constitute informal proof of a creditor’s claim as a “fact-bound environment”); 4 COLLIER ON BANKRUPTCY, supra note 25, ¶ 501.01 (“On balance, . . . rulings [on informal proofs of claim] are equitable in nature, based on the particular facts and circumstances of a given case.”). 131 4 LUNDIN, supra note 2, § 273.1, at 273-2; Maselli, supra note 2. 132 In re Stern, 70 B.R. 472 (Bankr. E.D. Pa. 1987). 133 In re Charter Co., 876 F.2d 861 (11th Cir. 1989). 134 In re Michels, 286 B.R. 684 (B.A.P. 8th Cir. 2002); In re Larson, 245 B.R. 609 (Bankr. D. Minn. 2000). 135 Pabis v. Associated Fin. Servs. Co., 62 B.R. 633 (Bankr. D. Conn. 1986). 136 In re Voccola, 234 B.R. 239 (Bankr. D.R.I. 1999). 137 In re Dietz, 136 B.R. 459, 461 (Bankr. E.D. Mich. 1992). 138 See, e.g., Michels, 286 B.R. at 692 (debtor’s “consistent articulated willingness” to pay the claim, coupled with the creditor’s actions, “are sufficient to establish the elements of an informal proof of claim”). 139 See supra Parts II.A.1-2, II.B.1.


III. PROPOSAL: DEBTOR-FILED ACKNOWLEDGMENTS OF CREDITORS’ CLAIMS SHOULD SERVE AS PROOF OF CLAIM IN CHAPTER 13

As an alternative to requiring creditors to formally file proof of

their Chapter 13 claims or to determining whether or not creditors’ earlier submissions amount to an informal proof of claim, courts should instead allow the Chapter 13 debtor’s filings that acknowledge creditors’ claims against the debtor to serve as formal proof of those creditors’ claims. By doing so, courts can resolve the problems, discussed above, that arise under the current approaches to proofs of claim in Chapter 13.

The most straightforward application of this proposal would be to allow the debtor’s statutorily-required list of creditors filed pursuant to section 521(a)(1)(A) to serve as proof of those creditors’ claims. Another possibility would be specifically to utilize either the debtor’s proposed plan of reorganization, or the confirmed plan, as the debtor-filed submission that would serve as proof of the creditors’ claims.140 In In re Dennis,141 for example, the court held that a confirmed plan included terms that acknowledged the creditor’s claim against the debtor, and therefore represented an “admission by the debtor” that such creditor has a valid claim, thereby rendering unnecessary the requirement that the creditor itself file a proof of claim.142

The initial appeal of such a proposal is that it takes advantage of statutorily-required submissions by the debtor. Because the Code requires a debtor to file a list of creditors,143 and requires the debtor to file a proposed plan of reorganization,144 the proposed approach does 140 There is no reason, however, that both possibilities, or for that matter, any submissions by the debtor that acknowledge creditors, might not properly serve as proof of those creditors’ claims. The argument presented here turns not on which particular document acknowledges the claims against the debtor, but rather that the debtor must, and as noted infra has incentives to, fully acknowledge creditors’ claims against it. 141 230 B.R. 244 (Bankr. D.N.J. 1999). 142 Id. at 252. More specifically, the court held that because confirmation binds the debtor under section 1327(a), a provision in the debtor’s confirmed plan that acknowledged a secured claimholder’s claim bound the debtor to pay the claim, despite the fact that the claimholder failed to file a proof of claim. Id.; 11 U.S.C. § 1327(a); 4 LUNDIN, supra note 2, § 274.1, at 274-6; see also infra Part IV.A (more thoroughly presenting the argument that adopting confirmed plans as proof of creditors’ claims comports with the res judicata effect intended by section 1327(a)). However, there would seem to be no reason why any documents that the debtor submits to the court that acknowledge creditors’ claims against the debtor could not serve as proof of the creditors’ claims. 143 11 U.S.C. § 521(a)(1)(A). 144 As noted supra note 38, 11 U.S.C. § 521(a)(1)(A) requires the debtor to file “a list of creditors,” and 11 U.S.C. § 1321 require the debtor to “file a plan.” Although courts are divided on what precisely constitutes the elements of a valid plan, see supra note 38, generally speaking, the plan “sets out . . . how the debtor desires to make payments to various creditors.” 8 COLLIER ON BANKRUPTCY, supra note 25, ¶ 1300.01. It has also been argued that Chapter 13 plans should make use of commercially-available forms for such plans that require the debtor to include the


not require any extra work on the part of the debtor beyond what the Code currently requires—it merely puts these acknowledgments to work beyond their current role, which is to prepare the notice sent to the creditors in preparation for the meeting of creditors.145

Debtors, of course, will naturally prefer to minimize the debts they must re-pay while in bankruptcy. Yet concerns that debtors’ awareness that their acknowledgments are serving as proof of creditors’ claims will incentivize debtors to be less than fully truthful and purposely fail to acknowledge creditors’ claims are mitigated by a number of factors. Among the debtors’ duties listed in section 521 of the Code is a “duty to cooperate” with the trustee.146 This is in addition to an overriding “good faith” requirement that the Code imposes upon Chapter 13 debtors.147 More severely, a debtor must also declare, under penalty of perjury, that the schedules it fills out are accurate,148 and debtors that engage in improper behavior during the course of a bankruptcy proceeding could be subject to criminal prosecution.149

Notwithstanding the risks of incurring such penalties, the likelihood of a debtor intentionally failing to properly complete its submissions listing claims against it is low, given that Chapter 13 debtors are engaging in a voluntary process that works best when they follow the rules.150 Of course, it is also possible that a debtor may, in length of the plan, the monthly plan payment, and the amount to be paid to unsecured claimholders. See In re Pedersen, 229 B.R. 445, 451-52 (Bankr. E.D. Cal. 1999); see also 1 LUNDIN, supra note 2, § 55.1. Chapter 13 debtors “ha[ve] much control over the order of payments to creditors . . . that gives debtors flexibility to design payment [plans] that match the needs of individual cases.” 3 LUNDIN, supra note 2, § 204.2, at 204-4; see also 11 U.S.C. § 1322(b)(4). 145 11 U.S.C. § 341(a); see also supra Part I.B (discussing the notice that Chapter 13 debtors must prepare for the trustee to send to the creditors). 146 11 U.S.C. § 521(a)(3) (“The debtor shall . . . (3) if a trustee is serving in the case . . . cooperate with the trustee as necessary to enable the trustee to perform the trustee’s duties under this title.”); 1 LUNDIN, supra note 2, § 41.1 (“The quid pro quo for remaining in possession and control of the estate in a Chapter 13 case [pursuant to section 1306(b)] is that the debtor must cooperate with respect to that property.”). 11 U.S.C. §§ 521(a)(3), 1306(b). If the debtor fails to file a list of creditors, the court, upon motion of the trustee, is authorized pursuant to section 1307(c)(10) to convert a case to Chapter 7, or dismiss the case altogether. 11 U.S.C. § 1307(c)(10); 1 LUNDIN, supra note 2, § 34.3, at 34-8. 147 11 U.S.C. § 1325(a)(3) (“Except as provided in subsection (b), the court shall confirm a plan if . . . (3) the plan has been proposed in good faith . . . .”). See, e.g., In re Smith, 286 F.3d 461, 465-66 (7th Cir. 2002) (“[T]he obligation of good faith is imposed on the debtor at two stages of a bankruptcy proceeding. First, the debtor must file his petition for Chapter 13 bankruptcy in good faith. . . . Second, the debtor must file his Chapter 13 plan in good faith.”); In re Banks, 248 B.R. 799, 803-04 (B.A.P. 8th Cir. 2000) (“The relevant inquiry regarding good faith is ‘whether the debtor has stated his debts and expenses accurately; whether he has made any fraudulent misrepresentation to mislead the bankruptcy court; or whether he has unfairly manipulated the Bankruptcy Code.’”) (quoting Educ. Assistance Corp. v. Zellner, 827 F.2d 1222, 1227 (8th Cir. 1987). 148 1 LUNDIN, supra note 2, § 35.10, at 35-16. 149 See 18 U.S.C. § 152; 1 LUNDIN, supra note 2, § 41.1, at 41-2. 150 See, e.g., 1 NORTON, supra note 23, § 19:1 (“Cases under Chapters 9, 12, and 13 may only


good faith, simply neglect to include a claim in its submissions to the court.151 In such a situation, debtors may voluntarily make amendments to any petition, list, schedule, or statement at any time before the case is closed,152 and give notice to the affected parties—subject, again, to the risks and penalties associated with failing to correct a known mistake.153

The next section presents policy arguments—namely, increasing uniformity and fairness, eliminating needless formalism, and decreasing litigation—that demonstrate that such an approach would largely resolve the problems that arise as a result of the formal filing requirement and the informal proof of claim approach.

be commenced voluntarily, while cases under Chapter 7 and 11 may be filed either voluntarily or involuntarily.”); 1 LUNDIN, supra note 2, § 3.2 (“Chapter 13 . . . is a purely voluntary chapter, and only debtors who desire to pay their creditors should be encouraged to undertake the discipline and years of commitment necessary to consummate a Chapter 13 plan.”); id., § 41.1, at 41-1 (“Chapter 13 is voluntary adjustment of debt that won’t work without earnest cooperation from the debtor.”). 151 1 LUNDIN, supra note 2, § 41.3 (“It is common for Chapter 13 debtors to make mistakes in the information they give to counsel by failing to list creditors, by misstating the amounts of claims, by undervaluing or overvaluing assets, and the like.”). 152 FED. R. BANKR. P. 1009. 153 1 LUNDIN, supra note 2, § 41.3. Such failure to rectify a known mistake can be considered fraud, which, under § 1330(a), is grounds for revoking a confirmed plan. 11 U.S.C. § 1330(a) (2000). It can also, again, subject the debtor to criminal sanctions. 1 LUNDIN, supra note 2, § 41.3. If a debtor does in good faith amend its submissions to the court, and yet such amendments were done late enough that the originally-unlisted creditor files its proof of claim after the bar date has already passed—or if the creditor remains unlisted, independently learns of the Chapter 13 case, and files a late proof of claim—then such “unscheduled creditors” unfortunately have little recourse with respect to the Chapter 13 case. 4 LUNDIN, supra note 2, § 283.1. Unscheduled creditors are those whose claims are not acknowledged by the debtor, and who therefore have no notice of the debtor’s Chapter 13 bankruptcy petition. See id. Courts and commentators generally agree that, notwithstanding the apparent harshness of this rule, the Code simply does not create an exception for a creditor who files a proof of claim after the 90-day bar date, and who was not scheduled by the debtor; such creditors’ claims are held to be untimely and thus not “allowed.” 11 U.S.C. § 502. It has been argued that despite this rule, the rights of such creditors without notice of a bankruptcy proceeding to which they are a party are nonetheless protected in other ways, e.g., “by relief from the automatic stay, by relief from the confirmation order, and by exception to discharge.” 4 LUNDIN, supra note 2, § 283.1, at 283-1 to 283-2. This Note does not address these issues surrounding such “unscheduled creditors.” Instead, the focus here is on the propriety of permitting creditors whose claims have been acknowledged by the debtor—via the schedule of assets and liabilities, the proposed plan, the confirmed plan, or other submissions—to rely on such submissions as their proof of claim.


IV. POLICY ARGUMENTS IN SUPPORT OF FORMALLY OBSERVING DEBTOR-FILED ACKNOWLEDGEMENTS OF CREDITORS’ CLAIMS

AS PROOF OF CLAIM

A. The Proposed Approach Results in Uniform and Simplified Duties for Chapter 13 Creditors Holding both

Secured and Unsecured Claims By allowing the debtor’s acknowledgments of claims against it to

serve as proof of creditors’ claims, courts can achieve greater uniformity with respect to creditors that hold both secured and unsecured claims against the debtor. As noted earlier,154 partially-secured creditors, or any creditors holding both secured and unsecured claims, are subject to differential filing duties with respect to those separate classes of claims, notwithstanding that such creditors hold those separate claims against the very same debtor. Adopting the debtor’s proposed or confirmed plan as proof of the claims against that debtor would eliminate this differential treatment of secured and unsecured claims. By virtue of the debtor’s submissions, such as the confirmed plan or the debtor’s proposed scheme to pay its secured and unsecured debts in its proposed plan, proof of every claim against the debtor that the debtor acknowledges—including both secured and unsecured claims—would be deemed to have already been filed. Thus, all claims will have been “timely filed” and thus “allowed.”155 As a result, both the secured and unsecured portions of a partially-secured creditor’s claim, and more generally, all claims of any individual creditor holding both secured and unsecured claims, will be “allowed” and thus amenable to participation in the plan’s distributions.

The resulting uniformity with respect to partially-secured creditors, and with respect to creditors holding both a secured claim and unsecured claim, makes good sense, because it eliminates needlessly differential treatment between any individual creditor’s claims. Furthermore, whether or not a given jurisdiction approves or disapproves of Rule 3002(a)’s implication that secured claimholders need not file a proof of claim in order to be “allowed,” such an approach would eliminate dispute on that issue. This is so because the debtor’s acknowledgment of the claims against it will already have served as proof of claim, so the Rule 3002(a) issue would be rendered moot. Finally, eliminating the differential filing requirement will allow courts to adhere more closely to Congress’ goals that Chapter 13 be

154 See supra Part II.A.1. 155 11 U.S.C. § 501; FED. R. BANKR. P. 3002(a).


administered in a simplified and efficient manner.156

B. The Proposed Approach Yields Fairer Treatment of

Chapter 13 Creditors and Eliminates Needless Formalism in Chapter 13 Cases

As noted earlier, when Chapter 13 plans are confirmed before the

bar date has arrived, creditors who are not acknowledged in the plan and who timely file their proof of claim after plan confirmation are unfairly excluded from the plan’s distribution of funds, and even creditors that are acknowledged by the debtor in its confirmed plan must needlessly file a proof of claim in order to receive payments. These problems with the formal filing requirement avail themselves of allowing submissions filed earlier in the life of the Chapter 13 case to serve as the creditors’ proof of claim. Allowing debtor-filed acknowledgements of claims to serve as proof of creditors’ claims will render those claims already filed under section 501 and thus “allowed” within the meaning of section 502, thereby including those claims in the plan’s distributions.157

First, under such a regime, the fairness problem illustrated above disappears. By allowing the debtor’s submissions to serve as proof of the creditors’ claims, the creditors would at least presumptively be “in the ballgame,” and would no longer be shut out of the plan because it was confirmed before the bar date.158 Second, such an approach would eliminate the formalism problem discussed above as well. Because the debtors’ own acknowledgements of the creditors’ claims would represent proof of those claims, there would no longer be any need for creditors to file “obviously superfluous”159 proofs of claim.160 To the extent that a proposed or confirmed plan itself acknowledges a creditor’s claim, it seems proper to allow those acknowledgements to 156 See supra Part I.A. 157 11 U.S.C. §§ 501-502; see also supra Part I.C. 158 Under such a regime, these creditors would only presumptively be “in the ballgame” by virtue of the debtor’s filings. To the extent that creditors may seek to challenge the amount or status of their claims listed by the debtor, they may still do so under the normal procedures regarding objections to confirmation laid out in section 1324. 11 U.S.C. § 1324. At least with regard to secured claims, it is arguably to the debtor’s advantage to presumptively include creditors in the plan and thus increase creditor participation, on the theory that secured creditors who are shut out of a Chapter 13 plan “will eventually foreclose outside of bankruptcy for the full debt amount . . . .” 1 GILMORE & CARLSON, supra note 8, § 14.04, at 947; see supra note 63. This same reasoning applies to the power granted to debtors by section 501(c) to file proofs of claim on the creditor’s behalf. 1 GILMORE & CARLSON, supra note 8, § 14.04, at 947 n.5. 159 1 GILMORE & CARLSON, supra note 8, § 14.04, at 953 160 Of course, as noted supra note 158, a creditor may still choose to file a proof of claim anyway, if the creditor disagrees with the debtor’s treatment of the creditor’s claims in the debtor’s proposed or confirmed plan. But the point remains that allowing the debtor’s filings to at least initially serve as proof of creditors’ claims eliminates an apparently needless requirement.


serve as proof of the creditor’s claim. While allowing debtor-filed submissions to serve as proof of

creditors’ claims would solve problems associated with the formal filing requirement discussed in Part II.A, such an approach would also eliminate the factually-burdensome inquiry associated with the “informal” proof of claim doctrine discussed in Part II.B.

C. The Proposed Approach Decreases Litigation

and Improves Efficiency By adopting an approach whereby a debtor’s filings serve as proof

of creditors’ claims, courts can largely eliminate the fact-intensive inquiry into whether a creditor has met the “informal” proof of claim standard. As noted earlier,161 creditors who fail to timely file formal proof of their claims can instead urge the court to consider their earlier communications as informal proof of their claims. If successful in their arguments, creditors have an “allowed” claim that is thus amenable to participation in the confirmed plan’s distributions.162

Instead of requiring creditors to file proof of their claims and then litigating the question over informal proofs of claim upon missing the bar date, the debtor’s acknowledgements of creditors’ claims should be treated as formal163 proof of those creditors’ claims. Under such an approach, courts would largely be relieved of the burden of determining whether a creditor has met the informal proof of claim test.164 This is so because such “acknowledged creditors” would no longer have any motivation to litigate the question—as far as such creditors are concerned, proof of their claims has already been filed.165 Furthermore, in light of the fact that the Code empowers debtors to file proof of claims on behalf of creditors,166 the argument that the proposed approach would be improper because it would eliminate the crucial 161 See supra Part II.B. 162 11 U.S.C. § 502. 163 Treating debtors’ acknowledgments of creditors’ claims as formal proof of those claims is not problematic, given the fact that, as noted supra note 63, the Code grants debtors the authority to file proofs of claim on behalf of creditors. See 11 U.S.C. § 501(c). 164 Courts would not be fully relieved of this burden, however, because they would still be required to determine whether creditors whose claims were not acknowledged by the debtor, but who nonetheless came to learn of the debtor’s bankruptcy case, and who had then missed the formal filing deadline, had somehow sufficiently communicated an intent to assert their claims. But to the extent that a debtor has acknowledged a creditor’s claims, treating the debtor’s filings as formal proof of those creditors’ claims would at least eliminate the need to inquire as to informal proof of claims as to those creditors. 165 This result is again subject to the caveat mentioned supra note 158, that such debtor-filed proofs of claim would only be a presumption, to which creditors would be free to object if they disagreed in some fashion with the debtor’s treatment of their claims. 166 See 11 U.S.C. § 501(c).


informal proof of claim inquiry of whether the creditor had an “intent to hold the debtor liable”167 cannot justify continued adherence to the informal proof of claim doctrine—at least with respect to creditors that the debtor has acknowledged. It makes intuitive sense that if the debtor has acknowledged claims of certain creditors, those creditors should not need to prove their intent to assert a claim against the debtor.

In summary, by adopting the debtors’ filings that acknowledge creditors’ claims, courts can largely eliminate the inherently fact-based inquiry of whether the creditor’s previous submissions meet the requirements of the informal proof of claim standard. Such an approach would not seem to result in losing anything particularly valuable from the informal proof of claim doctrine, and would affirmatively result in decreased litigation and increased efficiency of the Chapter 13 process, in keeping with the overall goals of the Code.168

V. DOCTRINAL JUSTIFICATION FOR FORMALLY OBSERVING DEBTOR-

FILED ACKNOWLEDGMENTS OF CREDITORS’ CLAIMS AS PROOF OF CLAIM

A. The Proposed Approach Comports with the Notion that Confirmed Chapter 13 Plans Are Res Judicata

By adopting debtor-filed submissions or confirmed Chapter 13

plans as proof of creditors’ claims, courts can hew more closely to the generally-accepted view that a confirmed plan’s terms are binding and thus have res judicata effect.169 As noted earlier, under section 1327(a) of the Code, once a Chapter 13 plan is confirmed by the court, the terms of the confirmed plan are binding on both creditors and debtors.170 Many courts interpret this to mean that plan confirmation renders as res judicata all issues that were or could have been litigated at or before the confirmation hearing.171 It seems clear that section 1327(a) binds

167 See supra Part II.B. 168 See supra Part I.A. 169 BLACK’S LAW DICTIONARY, supra note 34, at 608 (defining “res judicata” as “an issue that has been definitively settled by judicial decision”). 170 See supra Part I.B. Section 1327(a) states: “The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan and whether or not such creditor has objected to, has accepted, or has rejected the plan.” 11 U.S.C. § 1327(a). 171 3 LUNDIN, supra note 2, § 229.1, at 229-2 to 229-3. See, e.g., In re Adkins, 425 F.3d 296, 302 (6th Cir. 2005) (“confirmation of a plan has been described as ‘res judicata of all issues that could or should have been litigated at the confirmation hearing’”) (quoting In re Cameron, 274 B.R. 457, 460 (Bankr. N.D. Tex. 2002)); In re Bateman, 331 F.3d 821, 829 (11th Cir. 2003) (“[section] 1327 gives res judicata effect to a confirmed Chapter 13 plan”); In re Harvey, 213 F.3d 318, 321 (7th Cir. 2000) (“It is a well-established principle of bankruptcy law that a party with adequate notice of a bankruptcy proceeding cannot ordinarily attack a confirmed plan. . . .


creditors to the terms of a confirmed plan, and that requests by creditors to alter the confirmed plan fail, on the theory that the plan has res judicata effect.172 But by its very terms, section 1327(a) also requires that a confirmed plan bind both the creditor and the debtor to the terms of the plan.173 The current approach to proofs of claim, however, allows courts to disregard this binding effect on debtors.

As previously noted, the formal filing requirement requires creditors to file a proof of claim as a prerequisite to receiving disbursements from a confirmed plan.174 Thus, in situations when a plan is confirmed before the bar date yet the creditor filed proof of claim before the bar date, the trustee can assert that the proof of claim is not allowed and thus not entitled to payments.175 The same situation arises if the creditor fails to file a proof of claim altogether, whether or not the bar date preceded or followed plan confirmation—the failure to file proof of claim can be viewed as grounds for disallowance, and hence grounds to avoid payments to the creditor.

But if a debtor itself includes terms in a plan specifying re-payment to a given creditor, and if a confirmed plan is supposedly res judicata, then once the plan is confirmed, the res judicata effect should require the debtor to re-pay the creditor. This should hold true whenever, and whether or not, a proof of claim is filed by that creditor—the terms of a confirmed plan are “legal obligations of the debtor.”176 There thus exists a tension between the formal filing requirement and the supposedly res judicata effect of a confirmed plan.177 The reason for this . . . mirrors the general justification for res judicata principles.”); 8 COLLIER ON BANKRUPTCY, supra note 25, ¶ 1327.02. 172 11 U.S.C. § 1327(a); 3 LUNDIN, supra note 2, § 229.1. For example, if a creditor fails to file a timely objection to confirmation and fails to appeal an adverse holding, that creditor is bound by the terms of a confirmed plan, even if it contains terms that are inconsistent with other provisions of the Code. In re Jones, 134 B.R. 274 (N.D. Ill. 1991) (court’s confirmation of a proposed plan was a binding judicial determination of the debtor’s eligibility for Chapter 13 under § 101(30); such confirmation thus precluded the creditor from filing a motion to dismiss on the grounds that the debtor was ineligible ab initio); 3 LUNDIN, supra note 2, § 229.1, at 229-2. Creditors are also barred from using other procedural maneuvers—e.g., motions to dismiss, or motions for relief from the automatic stay—to collaterally attack a confirmed plan. Id. In the proof of claim context, it has been held that a debtor’s treatment of a secured claimholder as instead holding an unsecured claim was binding on the creditor, where the creditor had notice of the plan and did not object to confirmation. In re Ramey, 301 B.R. 534 (Bankr. E.D. Ark. 2003); 3 LUNDIN, supra note 2, § 229.1, at 229-14. 173 11 U.S.C. § 1327(a). 174 See supra Part I.C. 175 See In re Greenig, 152 F.3d 631 (7th Cir. 1998). 176 3 LUNDIN, supra note 2, § 229.1. 177 There are, admittedly, at least two possible interpretations under which, even in the face of a confirmed plan, it would nonetheless be appropriate to require creditors to file proofs of claim by the bar date as a prerequisite to receiving disbursements. Under one interpretation, confirmed plans are never really res judicata at all, given that section 1329 permits modification of plans even after confirmation. 11 U.S.C. § 1329. Thus, requiring creditors to file a proof of claim in order to receive payments would not undercut any res judicata principles. Under another


Allowing debtors’ submissions to the court—e.g., confirmed plans of reorganization—that acknowledge creditors’ claims to serve as proof of those creditors’ claims resolves the tension between the current formal filing requirement and the res judicata effect of confirmed plans. This is essentially the approach argued for in In re Dennis,178 where the court held that a confirmed plan, in which the debtor acknowledged the creditor’s claim, bound the debtor to the terms of the plan under section 1327(a), and thus bound the debtor to pay the claim to the extent provided for in the plan.179 By allowing such submissions to serve as proof of creditors’ claims, courts can eliminate the requirement that creditors file a proof of claim even when a plan of reorganization has been confirmed, and can thus accord greater respect to the res judicata effect of confirmed Chapter 13 plans.180

CONCLUSION

Each year, Chapter 13 creditors lose out on millions of dollars in

unpaid debts. Despite the fact that Chapter 13 is “intended to be an uncomplicated system for individuals to pay debts under Bankruptcy Court protection and supervision,”181 the general rule set forth by the Code and Rules for filing proofs of claim in Chapter 13, and in particular, the formal filing requirement set forth by sections 501, 502, and Rule 3002(c), is not only complex, but also treats partially-secured creditors in a non-uniform fashion, and, in the case of plans confirmed before the bar date, is needlessly formalistic and unfair to creditors.

Courts have responded to concerns that the formal filing requirement results in needlessly harsh outcomes by creating a common law exception to the general rule—the “informal” proof of claim interpretation, we might think of the formal filing requirement as a condition subsequent to the confirmed plan, i.e., that even if a confirmed plan is res judicata, failure to file a proof of claim breaches the agreement such that it is proper to deny payments to a creditor. 178 In re Dennis, 230 B.R. 244 (Bankr. D.N.J. 1999). 179 Id. In the words of the Dennis court, “[S]ince Code section 1327(a) also binds the debtor, a debtor’s proposal in a plan to pay a . . . creditor is an admission by the debtor that such creditor has an allowed secured claim to the extent provided by the plan.” Id. at 252. Because in Dennis the confirmed plan “[did] everything that a formal proof of claim would do,” Dennis, although limiting its holding to secured claims, thus exemplifies the proposal argued for in this Note—that confirmed or proposed plans that acknowledge claims against the debtor should be proof of those creditors’ claims. Id. 180 In re Fili, 257 B.R. 370 (B.A.P. 1st Cir. 2001) is distinguishable. In Fili, the court held that the res judicata effect of a confirmed plan bars a claim proof of which the creditor filed after confirmation. Id. at 374. The argument here, however, is not that the res judicata effect of confirmed plans should bar later-filed claims, but rather that the confirmed plan itself should serve as proof of the creditor’s claim, and thus that the res judicata effect of the plan binds the debtor to repay acknowledged creditors. 181 5 NORTON, supra note 23, § 113:11.


doctrine. This doctrine affords courts and creditors some flexibility by allowing creditors that have missed the filing deadline to assert that their earlier-filed submissions have evidenced an intent to participate in the Chapter 13 case, and thus should warrant the creditor’s inclusion in the distributions paid to creditors under a confirmed plan of reorganization. However, the informal proof of claim doctrine saddles courts with diverse and voluminous litigation over the question of what precisely constitutes an informal proof of claim.

Each of these two approaches to proofs of claim in Chapter 13 generally ignore the possibility that a debtor’s earlier-filed, and statutorily-mandated, submissions to the court can, and should, serve as formal proof of creditors’ claims. Sound policy reasons—namely, eliminating needless formalism, increased fairness, increased uniformity, and decreased litigation—exist in support of a proposal to allow debtor-filed submissions that acknowledge claims against the debtor’s estate to serve as formal proof of creditors’ claims. Furthermore, such an approach would allow courts to comport more closely with the generally-accepted view that confirmed Chapter 13 plans are res judicata.

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