Document Type
Research Memorandum
Publication Date
2009
Abstract
(Excerpt)
May a creditor’s claim be dismissed simply because he failed to provide supporting documentation in violation of Federal Rule of Bankruptcy Procedure 3001? The answer depends on which jurisdiction the creditor is pursuing its claim in. Courts are currently sharply divided on the issue. If the creditor is fortunate enough to be in a jurisdiction which follows the “exclusive” view, which is the majority rule, the answer to this problem will be yes. However, if the creditor happens to be in a jurisdiction which follows the “non-exclusive” view, which is the minority rule, the answer to this problem will be no. The allowance of a creditor’s proof of claim is governed by 11 U.S.C. § 502. Section 502 provides that a creditor’s proof of claim should be allowed except if the claim falls into one of the nine categories listed in section 502(b). According to the “exclusive” view, a creditor’s claim can only be dismissed for one of the nine reasons listed in section 502(b). Although failure to attach supporting documentation to a proof of claim is a violation of Rule 3001, courts that follow the “exclusive” view do not dismiss a creditor’s proof of claim for this violation because this violation is not one of those nine reasons listed in section 502(b). By contrast, the “nonexclusive” view does allow a creditor’s claim to be dismissed for reasons other than those specifically stated in section 502(b). Therefore, because failure to attach supporting documentation to a proof of claim is a violation of Rule 3001, courts which follow the “non-exclusive” view will dismiss a creditor’s proof of claim even though noncompliance with the Rule is not one of those nine reasons listed in section 502(b).
This article discusses the difference between the “exclusive” view and the “nonexclusive” view. First, this article examines the provisions of federal law at issue in this court split: 11 U.S.C. § 502 and Federal Rule of Bankruptcy Procedure 3001. Second, this article explains the differences between the “exclusive” view and the “nonexclusive” view, principally by analyzing two recent cases: B-Line v. Kirkland (In re Kirkland), 379 B.R. 341 (B.A.P. 10th Cir. 2007), which exemplifies the “exclusive view,” and In re Tran, 369 B.R. 312 (S.D. Tex. 2007), which exemplifies the “nonexclusive view.” Finally, this article concludes by discussing some important implications of this issue, specifically, the implications these two different views have on large third party debt buyers. These third party debt buyers, such as B-Line and eCast, buy thousands of unsecured claims from credit card companies for cents on the dollar and then seek to collect these claims from debtors in bankruptcy. Depending on which of the two views is applied to their often unsupported proofs of claim these companies stand to gain, or lose, millions of dollars.