Proof of Claim Rules are Different in Chapter 11 Cases (than Ch 7 and 13)
In re Pitbull Realty, NHBK, 2021 BNH 001: “Only certain claimants are required to file proofs of claim or interest in a chapter 11 reorganization case.” In re Candy Braz, Inc., 98 B.R. 375, 378 (Bankr. N.D. Ill. 1988). In a chapter 11 case, “[a] proof of claim or interest is deemed filed under [Bankruptcy Code §] 501
. . . for any claim or interest that appears in the schedules filed under [Bankruptcy Code § 521(1)] . . . except a claim or interest that is scheduled as disputed, contingent or unliquidated.” 11 U.S.C. § 1111(a). See also In re Candy Braz, Inc., 98 B.R. at 379 (explaining that
Bankruptcy Code § 1111(a) “‘dispense[s] with the need for every creditor and equity holder to file a proof of claim or interest in a reorganization case.’”) (citations omitted). Rule 3003(b)(1) provides that, in chapter 11 cases, “[t]he schedule of liabilities . . . shall constitute prima facie evidence of the validity and amount of the claims of creditors, unless they are scheduled as disputed, contingent, or unliquidated.” Fed. R. Bankr. P. 3003(b)(1) (emphasis added). It further states that “[i]t shall not be necessary for a creditor . . . to file a proof of claim . . . except as provided in [Rule 3003](c)(2)[,]” which outlines who must file a proof of claim and the consequences of failing to do so. Id. See also Fed. R. Bankr. P. 3003(c)(2). Rule 3003(c)(2)requires “[a]ny creditor . . . whose claim . . . is not scheduled or scheduled as disputed, contingent, or unliquidated [to] file a proof of claim . . . .” Fed. R. Bankr. P. 3003(c)(2). If a debtor schedules a creditor’s claim as disputed, contingent, or unliquidated, the creditor’s failure to timely file a proof of claim will preclude it from voting or participating in any distribution under a plan. See Id. “[Rule 3003] provides that claims scheduled by the Debtor are entitled to the same prima facie evidentiary effect as those claims for which a properly executed proof of claim is filed[.]” In re Eternal Enter., Inc., 557 B.R. 277, 285 (Bankr. D. Conn. 2016). Under Rule 3003(b)(1), Boulia-Gorrell Lumber and Kabbage Loan’s claims are presumptively valid. “‘To overcome this prima facie evidence, the [Debtor] must come forth with evidence which, if believed, would refute at least one of the allegations essential to the claim[s].’” In re Eternal Enter., Inc., 557 B.R. at 286 (quoting In re Reilly, 245 B.R. 768, 773 (B.A.P. 2d Cir. 2000)).
In this case, the Debtor failed to meet its initial burden as to both claims. The Debtor’s objections are based solely on the creditors’ failure to file proofs of claim in the case, as opposed to the merits of the claims under section 502(b). Because the Debtor (its lawyer) did not schedule Boulia Gorrell Lumber and Kabbage Loan’s respective claims as disputed, contingent, or unliquidated, they were not obligated to file a proof of claim unless they disagreed with the scheduled claim amount or its character.
When a creditor is not required to file a proof of claim pursuant to Rule 3003(b)(1) and (c)(2), an objection should “not deprive the [scheduled claim] of its presumptive validity unless the objection is supported by substantial evidence.” Juniper Dev. Grp. v. Kahn (In re Hemingway Transp., Inc.), 993 F.2d 915, 925 (1st Cir. 1993) (explaining that a properly filed proof of claim constitutes prima facie evidence of the validity and amount of the claim and noting the objecting party’s evidentiary burden). Although Hemingway Transport involved
objections to filed proofs of claim, there is no principled reason to assign different burdens of proof for claims that were scheduled as undisputed, liquidated and noncontingent in a chapter 11 case. In the circumstances of this case, interposing objections to claims in the chapter 11 plan does not have the effect the Debtor desires. Disallowance of the scheduled claims—for no otherreason than the creditors’ failure to respond to baseless objections—would be neither consistent with the Code and the Rules nor fundamentally fair.
