In re: Ashworth, No. 09-03648-TLM (Bankr. D. Idaho, January 28, 2011).
What happens if a creditor fails to file its proof of claim on time? A recent Idaho bankruptcy court addressed this question.
In a Chapter 13 case, debtor Debra Ashworth filed a petition for Chapter 13 bankruptcy relief. Her plan proposed to completely discharge an unsecured second mortgage on her home, held by HSBC. Ashworth surrendered her home to creditors, and it was foreclosed on by the bank with a priority lien on her home. HSBC was notified of the sale, but did not respond.
A month later, or ten months after Ashworth's plan was confirmed by the bankruptcy court, HSBC sought relief from the court. The court denied the bank relief. HSBC argued that, under the Bankruptcy Code, an untimely filed claim can be allowed and treated as timely if the court finds there was "excusable neglect". However, the court disagreed, stating that excusable neglect is not a basis for allowing an untimely claim.
While it may be possible for creditors to enter a late proof of claim, they may not do so without evidence or basis in the Bankruptcy Code. Additionally, the timing and circumstances of a late filing may be relevant, where, as here, the creditor filed months after the case was confirmed.
