Failure to Time File a Proof of Claim and Excusable Neglect - Revisited
In a Chapter 7 bankruptcy case a creditor must timely file a proof of claim to participate in any distribution. In a Chapter 11 case, a creditor must file a proof of claim if the amount scheduled by the debtor in its Schedules is incorrect or is not scheduled at all. What happens if the creditor misses the deadline to file a proof of claim? Generally, the claim will be disallowed. However, the Bankruptcy Code permits reconsideration of the disallowance “for cause,” 11 U.S.C. § 502(j), which then depends on the “equities of the case.” Colley v. Nat’ Bank of Texas (In re Colley), 814 F.2d 1008, 1010 (5th Cir. 1987). The United States Supreme Court has held that “excusable neglect” standard can be used in situations involving the failure to timely file a proof of claim. Pioneer Inv. Servs. Co. v. Brunswick Assoc. Ltd. P’ship, 507 U.S. 380, 394 (1993). Excusable neglect involves and equitable determination which takes into account “all relevant circumstances surrounding the party’s omission.” Id. at 395. One Court has held that, in cases that have not been heard on the merits, “the determination of whether there is excusable neglect takes into account the length and reason for the delay, the impact on the case and judicial proceedings, and whether the movant requesting relief has acted in good faith.” Burrell v. Henderson, 434 F.3d 826, 831, 832 (6th Cir. 2006).