In re: Mitchell, No. 10-12545 (Bankr. N.D. Calif., January 28, 2011).
When can a creditor file a claim against an individual in bankruptcy? In a recent 9th Circuit decision, a bankruptcy court in California addressed this issue.
In this case, Redwood Credit Union moved to have the court allow the Union to file a late claim against the debtor, Jack Mitchell.
In a Bankruptcy case, a debtor is required to inform any interest party (read: creditors) of the commencement of the bankruptcy case. Thereafter, a creditor has a limited time in which to file a proof of claim to the court. If the creditor does not do this, he is barred from recovery. These timelines are governed by the Federal Rules of Bankruptcy Procedure.
Rule 3002(c) of the Federal Rules of Bankruptcy Procedure requires a proof of claim to be filed within 90 days of the first date set for the meeting of creditors. The rule then lists six exceptions to the requirement that a creditor file a timely claim. Those exceptions are: (1) If the creditor is a governmental unit, (2) if it is in the interest of justice to do so, and it will not unduly delay the administration of the case, (3) a judgment lien can be filed up to 30 days after the judgment becomes final, (4) a claim arising from the rejection of an executory contract or unexpired lease, (5) if notice of insufficient assets to pay a dividend was given to creditors, or (6) if notice of the time to file a proof of claim was failed to a foreign address.
In this case, Redwood Credit Union failed to establish that any of the above exceptions applied. Because of this, the bank lost the ability to have its claim administered in court, and lost all recovery.
