I, like many Orlando bankruptcy lawyers, am a member of an online discussion group made up of bankruptcy lawyers in Central Florida. Recently, one of the issues the group was discussing concerned, in a Chapter 13 bankruptcy case, how long a creditor has to file a proof of claim for a mortgage on a property that was surrendered in the Chapter 13 bankruptcy.
Fortunately, I litigated this issue in one of my 2007 cases, and the Judge actually wrote an opinion on the issue. You can read it here.
The problem the Court tackled was mortgage companies waiting so long, in my case it was over a year after the Chapter 13 was confirmed, to file a proof of claim for property they know was going to be surrendered the day we filed the case. If that claim is not objected to by the bankruptcy lawyer, and is allowed by the Court, then that could really mess up a Debtor’s Chapter 13 plan.
In my case, my clients made a good income and were paying a 100% dividend to their unsecured creditors, or about $32K. Over a year after their case was confirmed the creditor came in and filed an unsecured claim of $100K. Ouch! If I didn’t object to that claim as being late, there was no way, even with their good income, that my clients could have made the higher payment and their case would have been dismissed.
The Judge agreed with me and my clients, disallowed the claim, and in so doing my clients were able to continue in their Chapter 13 bankruptcy and wipe out a mortgage debt of $100K. Pretty good deal for my clients, and it was the right decision. After all, why should a mortgage company have an unlimited amount of time to do something they should have done early on in the case? Especially when the result of that action would mean dismissal of an otherwise perfect case.
As I mentioned before, this was a 2007 case. Since that time, the Confirmation Orders entered in Chapter 13 plans here in Orlando have changed to contain language that requires the creditor to file a “deficiency claim” for a mortgage on a property that is being surrendered of stripped in a Chapter 13 case at least 91 days from Confirmation of the Plan. Now, every Orlando bankruptcy lawyer should be secure in the knowledge that if it’s not done by then, the claim is not allowed.
So, creditors do not have an unlimited amount of time to file a proof of claim in a Chapter 13 bankruptcy case filed in Orlando. In fact, now it’s clearly stated in the Confirmation Order exactly how long a creditor has. Kind of makes you wonder if those Orlando bankruptcy lawyers in that discussion group actually read the Orders issued in their clients’ cases, doesn’t it?
