United States Court of Appeals,
Fifth Circuit.
No. 94-20128.
In the Matter of Patrick Gerald WAINDEL and Susan Louise Waindel,
Debtors.
UNITED STATES of America, Appellant,
v.
Patrick Gerald WAINDEL and Susan Louise Waindel, Appellees.
Oct. 9, 1995.
Appeals from the United States District Court for the Southern
District of Texas.
Before JONES, DUHÉ and STEWART, Circuit Judges.
EDITH H. JONES, Circuit Judge:
The Internal Revenue Service (IRS) appeals the district
court's and bankruptcy court's disallowance of a tardily filed
claim for unpaid taxes, penalties and interest in the debtors'
Chapter 13 case. The lower courts held that tardily filed priority
claims are disallowed from recovery under Bankruptcy Rule 3002 and
that IRS's claim was not a mere amendment of another claim it filed
in the case. Because IRS apparently finds it difficult to comply
with the bankruptcy rules' 90-day "bar date" for filing proofs of
claim, these questions have arisen repeatedly in recent years, and
conflicting authorities have piled up. See, e.g., United States v.
Chavis (In re Chavis), 47 F.3d 818 (6th Cir.1995); United States
v. Towers (In re Pacific Atlantic Trading Co.), 33 F.3d 1064 (9th
Cir.1994); United States v. Vecchio (In re Vecchio), 20 F.3d 555
(2nd Cir.1994); Internal Revenue Service v. Century Boat Co. (In
1
re Century Boat Co.), 986 F.2d 154 (6th Cir.1993). Fortunately,
Congress fixed the problem for tax claims in cases filed after
October 22, 1994.1 As for the many pre-amendment cases, however,
this court sides with the analysis that holds tardy claims to be
tardy, not disallowed, but potentially entitled to no more than
lower-priority recovery from the debtor's estate. 11 U.S.C. §
726(a)(3). In this case, our result reverses the judgments of the
lower courts insofar as the "allowance" of IRS's late-filed claim
is concerned, but we also hold IRS was not entitled to priority
claim distribution rights and that its late claim was not a
permissible amendment to an earlier, timely claim. The lower court
judgments are technically reversed in part and affirmed in part,
but IRS recovers nothing on its tardy claim.
I.
BACKGROUND
Patrick and Susan Waindel filed a Chapter 13 petition on
August 5, 1991. Before this filing, the IRS notified them that it
was disallowing certain deductions they had taken for the tax years
1982 through 1986. The Waindels listed on the Chapter 13 Statement
filed with their petition an estimated tax liability for 1990 of
$20,000, and estimated and disputed tax liabilities for 1982 and
1983 of $16,850 and $9,500 respectively. No explanation has been
offered as to why the debtors did not schedule estimated and
disputed tax liabilities for the years 1984 through 1986.
The bankruptcy court issued a notice of the § 341 meeting of
1
See 11 U.S.C. § 502(b)(9) (Supp.1995).
2
creditors specifying that all proofs of claims were to be filed
prior to February 4, 1992 in order to be allowed and paid. Shortly
after receiving this notice, the IRS filed a timely proof of claim
for taxes, penalties, and interest for 1990 in the amount of
$20,796.52.2 On February 6, 1992, two days after the filing
deadline, the IRS filed an "amended" proof of claim asserting a
total claim of $73,781.79 spanning the years 1982, 1983, 1984,
1985, 1986, and 1990.3
Debtors objected to the amended proof of claim arguing that it
was actually a new claim that must be disallowed because it was not
timely filed pursuant to Bankruptcy Rule 3002(c). Prior to trial,
the parties stipulated that deficiencies for all of the tax years
in question totalled $71,151.98. At trial, the IRS offered
uncontroverted testimony that the amended proof of claim was
actually prepared on January 6, 1992—well in advance of the
February 4 deadline. Unforeseen personnel changes were blamed for
the tardiness of the actual filing.
The bankruptcy court ruled that because the amended proof of
claim was not of the same generic origin as the original proof of
claim, it did not properly qualify as an amendment, but was
actually a new claim. The bankruptcy court further held that the
bar date set forth in Rule 3002(c) precluded allowance of any
2
Of the claim for 1990 taxes, $20,059.25 was a priority
unsecured claim, and $737.27 was a general unsecured claim.
3
The claim for 1990 was ultimately reduced to $142.22 in
interest after the IRS received and processed the debtors' 1990
tax return and payment.
3
claims filed after that bar date.4 The district court affirmed the
decision of the bankruptcy court. The IRS now appeals.
II.
DISCUSSION
Before the enactment of the Bankruptcy Code in 1978, section
57n of the 1898 Bankruptcy Act (hereinafter "the Act") barred
late-filed claims from sharing in distributions of the debtor's
estate. The Waindels assert that the bar date concept was carried
over into the Code. IRS argues that to the contrary, the Code
eschewed the bar date as a complete bar to recovery and opted
instead for a system that separates claims into two categories,
timely and tardy. It is of course not enough to posit that
Congress meant to preserve the certitude of the bar date. One must
rely upon the text of the Code, if it is plain, as the definitive
guide to congressional intent. See United States v. Ron Pair
Enterprises, 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d
290 (1989).
The text of the Code does not support a bar date as a complete
bar to recovery. As other courts have noted, sections 501, 502 and
726 are the Code provisions that respectively concern the filing of
claims, their allowance, and the priority of distribution to
claimants. Although none of these provisions sets a bar date or
depends for its efficacy on a total bar, the imposition of
deadlines for filing claims is clearly contemplated. Section
4
The court also noted that Bankruptcy Rules 3002(c) and
9006(b)(3) provided for an extension of the bar date upon proper
motion. However, no such motion was filed by the IRS.
4
501(c) authorizes a debtor or the trustee to file a proof of claim
for a creditor who has not timely filed in his own behalf. Section
726 permits late-filed claims to share in the debtor's estate in
two circumstances, differentiating according to whether the
claimant had sufficient notice of the bankruptcy to permit a timely
filing. 11 U.S.C. § 726(a)(2)(C), (a)(3). While § 502(b) lists
various exceptions to the "allowance" of claims against the debtor,
however, untimeliness is not among them. The Code therefore
renders timely filing of claims significant for purposes other than
"allowance."
The concept of a bar date as preventing recovery from the
debtor's estate arises not from the Code but from Bankruptcy Rule
3002(a), which requires timely filing of a claim for it to be
"allowed." Keying "allowance" to timeliness is a vestige of
practice under the 1898 Bankruptcy Act; the original authors of
the Bankruptcy Rules more or less transcribed the absolute bar date
rule based on the Act into Rule 3002 accompanying the Code. See
Rule of Practice and Procedure in Bankruptcy 3002, Advisory
Committee's Note; 3 Collier on Bankruptcy ¶ 3002.02 at 3002-6
(15th ed. 1993). The Advisory Committee, as delegate of the
Supreme Court's bankruptcy rulemaking power, had no authority to
write a rule inconsistent with the Code. 28 U.S.C. § 2075.5
5
Section 2075 provides in pertinent part:
The Supreme Court shall have the power to
prescribe by general rules, the forms of process,
writs, pleadings, and motions, and the practice and
procedure in cases under title 11.
5
Nevertheless, to the extent that Rule 3002(a) declares every
untimely filed claim to be disallowed, the Rule impermissibly
conflicts with the Code. We agree with the courts, cited above,
that so hold.
In order to read Rule 3002(a) consistently with Code §§ 501,
502 and 726, the bankruptcy rule must be viewed as providing a
dividing line between timely and tardy claims, rather than a flat
ban on the allowance of late-filed claims. Accord Vecchio, 20 F.3d
at 559 ("[A] rule of procedure that disallows claims for
untimeliness cannot stand."); In re Pac. Trading Co., 33 F.3d
1064, 1067 (9th Cir.1994); see also Cisneros v. United States, 994
F.2d 1462, 1465 (9th Cir.1993).6
In most cases, the inartful language of Rule 3002(a) makes no
Such rules shall not abridge, enlarge, or modify
any substantive right.
The Supreme Court shall transmit to Congress not
later than May 1 of the year in which a rule prescribed
under this section is to become effective a copy of the
proposed rule. The rule shall take effect no earlier
than December 1 of the year in which it is transmitted
to Congress unless otherwise provided by law.
11 U.S.C. § 2075.
6
The Sixth Circuit recently reached a contrary conclusion in
In re Chavis, 47 F.3d 818 (6th Cir.1995). The Chavis court held
that tardily filed claims were not allowed claims under sections
501 and 502. Id. 823-24. However, as explained above, this
reading renders portions of section 726 superfluous.
The Chavis court also drew a distinction between
chapter 7 and chapter 13 cases. Id. at 824. Although we
agree that there are "fundamental differences" between the
two types of cases, the provisions of chapter 5 apply
equally to both. See 11 U.S.C. § 103(a). Our
interpretation of the Code obviates the need to draw an
extra-textual distinction.
6
practical difference. Section 726 sets forth the order for payment
of claims. The general scheme requires payment of priority claims
followed by unsecured claims and, if any money remains, payment of
late claims, various types of penalties and interest. There will
hardly ever be surplus funds available to the estate after payments
to the first two tiers of creditors in a Chapter 7 case so as to
enable payments upon untimely general unsecured claims pursuant to
section 726(a)(3). In Chapter 11 and 13 cases, where section 726
furnishes a baseline for distribution priorities under plans,7 the
plans can incorporate parallel treatment for late-filed claims.
Particular problems have arisen however, in regard to untimely
priority claims. See United States v. Chavis (In re Chavis), 47
F.3d 818 (6th Cir.1995); United States v. Towers (In re Pacific
Atlantic Trading Co.), 33 F.3d 1064 (9th Cir.1994); United States
v. Vecchio (In re Vecchio), 20 F.3d 555 (2nd Cir.1994); Internal
Revenue Service v. Century Boat Co. (In re Century Boat Co.), 986
F.2d 154 (6th Cir.1993). More precisely, the question is what
consequences, if any, attach to tardiness in filing a claim that
would otherwise be entitled to priority distribution. IRS argues
here that because Rule 3002(a) does not "disallow" its late-filed
7
Chapters 1, 3, and 5 of the Code apply to cases under
Chapters 7, 11, 12, and 13. 11 U.S.C. § 103(a). Although
Chapter 7 does not explicitly apply to Chapter 13 cases, certain
provisions in Chapter 13 incorporate portions of Chapter 7.
Section 1325 requires that a creditor receive an amount "not less
than the amount that would be paid on such claim if the estate of
the debtor were liquidated under chapter 7 of this title ..."
Id. at § 1325(a)(4). See also 11 U.S.C. § 1129(a)(7)(A), as
explained Collier on Bankruptcy (15th ed.) ¶ 1129.02, at 1129-32,
by quoting legislative history that cross-references this
provision to §§ 726(a)(3) and 726(a)(4).
7
claim, there is no bar date at all for priority claims. The
interpretation of the IRS rests on section 726, which provides in
pertinent part as follows:
§ 726. Distribution of property of the estate
(a) Except as provided in section 510 of this title,
property of the estate shall be distributed—
(1) first, in payment of claims of the kind specified in,
and in the order specified in, section 507 of this title
or tardily filed before the date on which the trustee
commences distribution under this section.
(2) second, in payment of any allowed unsecured claim,
other than a claim of a kind specified in paragraph (1),
(3), or (4) of this subsection, proof of which is—
(A) timely filed under section 501(a) of this title;
(B) timely filed under section 501(b) or 501(c) of
this title; or
(C) tardily filed under section 501(a) of this
title, if—
(i) the creditor that holds such claim did not have
notice or actual knowledge of the case in time for
timely filing of a proof of such claim under
section 501(a) of this title; and
(ii) proof of such claim is filed in time to permit
payment of such claim;
(3) third, in payment of any allowed unsecured claim
proof of which is tardily filed under section 501(a) of
this title, other than a claim of the kind specified in
paragraph (2)(C) of this subsection; ...
The late claim filed by the IRS for back taxes owed by the
Waindels is a priority unsecured claim under section 507(a)(7).
Section 507 claims ordinarily receive first-tier distribution
status as specified in section 726(a)(1).8 Section 726(a)(1), in
8
The portion of the IRS's claim relating to penalties for
failing to file a tax return are given fourth level distribution
8
contrast to § 726(a)(2), draws no distinction based upon the
timeliness of the filing of the priority claim. IRS infers from
the omitting of express subordination of late-filed priority claims
that no adverse consequences attach to its tardiness, and the
entire tax claim is entitled to first-tier status. See In re
Vecchio, 20 F.3d at 560; Cardinal Mine Supply, 916 F.2d at 1091.
This argument requires us to ignore that third-tier status is
expressly conferred upon "any allowed unsecured claim proof of
which is tardily filed under section 501(a) of this title, other
than a claim of the kind specified in paragraph (2)(C) of this
subsection." 11 U.S.C. § 726(a)(3) (emphasis added). In re
Vecchio described the categorization of late-filed priority claims
among other tardily filed "allowed unsecured claims" as leading to
an "absurd result." 20 F.2d at 558. We disagree. First, priority
unsecured claims are a species of allowed unsecured claims and are
facially within § 726(a)(3). Section 507, which defines claims
entitled to priority, also repeatedly refers to these as "allowed
unsecured claims" of various types. See 11 U.S.C. § 507(a)(3),
(4), (5) and (6). Priority tax claims are defined as "allowed
unsecured claims of governmental units...." 11 U.S.C. § 507(a)(7).
There is nothing anomalous about providing timely-filed priority
claims first-tier distribution status, while relegating the
untimely claims to third-tier among other untimely filed "allowed
unsecured" claims.
Second, contrary to Vecchio, it is not illogical that
status under section 726(a)(4).
9
late-filed priority claims may receive distribution after certain
tardy general unsecured claims. Only a tiny class of non-priority
creditors receives that benefit: those who failed to receive
timely notice of the bankruptcy and who then filed in time to
permit payment on their claims. Moreover, priority claimants will
almost always be on notice of the pendency of a case and thus
empowered to protect their rights.9
Third, Vecchio errs in suggesting that the dichotomy between
subsections 726(a)(3) and (a)(4) will permit late-filed fines and
penalties to receive distributions ahead of timely filed claims for
punitive relief based on (a)(4). Consistent with bankruptcy
practice, any claim can be split into its component parts—priority,
secured, unsecured, penalties, etc.—and may receive distribution
based on the resulting spectrum.
Finally, the decision in Vecchio, disallowing any effective
bar date for priority claims, conflicts with § 501(c), which
permits a debtor to file a proof of claim whenever a creditor does
not timely file its own claim. This provision was intended to
allow debtors to complete the list of claims against the estate in
a timely fashion and to ascertain the basis for and amounts of
creditors' distributions. The particular object of this salutary
provision was untimely priority claims, because of their
9
Oppenheim, Appel, Dixon & Co. v. Bullock (In re Robintech),
863 F.2d 393, 398 (5th Cir.), cert. denied, 493 U.S. 811, 110
S.Ct. 55, 107 L.Ed.2d 24 (1989) ("Frequent players in the
bankruptcy arena ... are aware that deadlines are important and
should not be heard to complain of unfairness except under the
most egregious circumstances.").
10
potentially heavy impact on a case. Vecchio's analysis overlooked
§ 501(c) and in so doing unwittingly emasculated it. Our result
reinforces the provision.
Any court that interprets questions under the Bankruptcy Code
must do so with humility—the Code's provisions are not always
clear, and they are often overlaid with ancient non-statutory
bankruptcy lore that is difficult to dislodge. The reasonable
disagreements among the circuit and bankruptcy courts in this case
exemplify the problem. We conclude, at variance with some of our
brethren, that for obvious reasons going to the heart of the
efficiency and fairness of the bankruptcy system, the Code attaches
consequences to failure to comply with proof of claim deadlines.
Further, the Code contemplates no distinction between late-filed
priority and other late-filed allowed unsecured claims, both of
which may recover, if at all, only under § 726(a)(3) or its Chapter
11 or 13 equivalents.
Applying the Code and Rules to the case sub judice, we hold
that the IRS's tardily filed claim is not entitled to first tier
status as IRS hoped. The claim might be entitled to a distribution
under § 726(a)(3) along with any other untimely allowed secured
claims, but the availability of such relief has not been argued
before us and is waived. Cinel v. Connick, 15 F.3d 1338, 1345 (5th
Cir.1994).
The IRS alternatively contended in the lower courts that the
bankruptcy court abused its discretion by not allowing the amended
claim to "relate back" to the date of the original filing. The
11
leading Fifth Circuit case on allowance of amendments to proofs of
claim is In re Kolstad, 928 F.2d 171 (5th Cir.) cert. denied 502
U.S. 958, 112 S.Ct. 419, 116 L.Ed.2d 439 (1991). In Kolstad, we
explained that "[a]mendments to timely creditor proofs of claim
have been liberally permitted to "cure a defect in the claim as
originally filed, to describe the claim with greater particularity
or to plead a new theory of recovery on the facts set forth in the
original claim.' " Id. at 175 (quoting In re Int'l Horizons, Inc.,
751 F.2d 1213, 1216 (11th Cir.1985)). However, "courts that
authorize amendments must ensure that corrections or adjustments do
not set forth wholly new grounds of liability." Kolstad, 928 F.2d
at 175.
The bankruptcy court and the district court both concluded
that the amended proof of claim set forth new grounds of liability.
The IRS candidly admitted as much at oral argument. We find no
error, much less any abuse of discretion in the court's refusal to
allow the amended claim to relate back to the filing of the initial
proof of claim.
III.
CONCLUSION
The IRS's tardily filed claim is "allowed" under 11 U.S.C. §
502, but it is not entitled to first-tier status under 11 U.S.C. §
726(a)(1). Further, the lower courts did not abuse their
discretion in refusing to allow the amended tardily filed claim to
relate back to the filing date of the original claim. REVERSED in
part, AFFIRMED in part.
12
DUHÉ, Circuit Judge, concurring in the judgment:
The majority invalidates the claims bar date of Bankruptcy
Rule 3002 and with that I respectfully disagree. Although the
majority suggests otherwise, its invalidation of the bar date in a
Chapter 13 case creates a circuit split.1 The majority rejects the
bar date because Section 726(a) allows the payment of a claim even
if proof of it is tardily filed. But § 726 does not apply to a
case under Chapter 13. See 11 U.S.C. § 103(b) (1988). Rather, I
would uphold the bar date in this Chapter 13 case and bar the IRS's
tardily filed proof of claim, thereby affirming the district court.
Because the majority ultimately concludes, however, that the IRS
receives nothing on its claim, I concur in the judgment.
We should not invalidate a procedural rule like Bankruptcy
Rule 3002 absent a strong justification. The Supreme Court has
instructed us to presume the validity of procedural rules. See
Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 1144, 14 L.Ed.2d
8 (1965). Procedural rules should reflect congressional intent
because Congress acquiesces in their approval. Id.; Sibbach v.
1
Other circuits have invalidated the bar date in a Chapter 7
context. See United States v. Towers (In re Pacific Atl. Trading
Co.), 33 F.3d 1064, 1067 (9th Cir.1994); United States v.
Vecchio (In re Vecchio), 20 F.3d 555, 559 (2d Cir.1994); see
also IRS v. Century Boat Co. (In re Century Boat Co.), 986 F.2d
154, 158 (6th Cir.1993) (refusing to bar untimely proof of claim
by creditor who lacked notice of the Chapter 7 bankruptcy
filing); United States v. Cardinal Mine Supply, 916 F.2d 1087,
1091-92 (6th Cir.1990) (same). The only circuit to address the
validity of the bar date in a Chapter 13 context has upheld the
bar date. See United States v. Chavis (In re Chavis), 47 F.3d
818, 823-24 (6th Cir.1995). The majority's invalidation of the
bar date in a Chapter 13 case, therefore, creates a circuit split
with the Sixth Circuit's decision in Chavis.
13
Wilson & Co., 312 U.S. 1, 14-15, 61 S.Ct. 422, 426-27, 85 L.Ed. 479
(1941). The rigorous adoption process for procedural rules creates
a strong presumption that the rules properly reflect the balance
between substantive and procedural law. See Hanna, 380 U.S. at
471, 85 S.Ct. at 1144; Sibbach, 312 U.S. at 14, 61 S.Ct. at 426-
27. Consequently, we should invalidate a Bankruptcy Rule only if
it is plainly inconsistent with the Bankruptcy Code or if it
transgresses the Constitution. See Hanna, 380 U.S. at 471, 85
S.Ct. at 1144; Cisneros v. United States (In re Cisneros), 994
F.2d 1462, 1465 (9th Cir.1993); cf. FDIC v. Hirsch (In re Colonial
Realty Co.), 980 F.2d 125, 132 (2d Cir.1992) (harmonizing two
statutes with arguably inconsistent requirements when possible).
The majority impliedly concedes that Bankruptcy Rule 3002 is
not inconsistent with 11 U.S.C. §§ 501-502 (1988) (amended 1994).
Both Sections are silent as to a bar date or the ability of a
creditor to file an untimely claim.2 Section 501, however,
contemplates a procedural requirement of timely filing by expressly
referring to untimely claims. The legislative history of § 501
2
Sections 501 and 502 create the following framework: A
creditor may file a proof of claim. Id. § 501(a). Other parties
with an interest in the creditor's claim may file a proof of
claim if the creditor does not file it timely. Id. § 501(b),
(c). If a proof of claim is filed in accordance with § 501, the
claim is deemed allowed unless a party in interest objects. Id.
§ 502(a). Section 502(b) then lists eight substantive reasons
for disallowing claims. Therefore, § 501 gives certain parties
the substantive right to file a proof of claim, and § 502
provides for an analysis of the merits of the claim filed in
accordance with § 501. In re Tucker, 174 B.R. 732, 739
(Bankr.N.D.Ill.1994).
14
further supports the existence of a timeliness requirement.3
Section 501, therefore, incorporates Bankruptcy Rule 3002 so that
timeliness is a prerequisite to allowance of a claim under § 502.
Chavis, 47 F.3d at 823; In re Tucker, 174 B.R. 732, 739
(Bankr.N.D.Ill.1994); Gullatt v. United States (In re Gullatt),
169 B.R. 385, 387 (M.D.Tenn.1994); In re Zimmerman, 156 B.R. 192,
195-96 (Bankr.W.D.Mich.1993) (en banc); see also 8 Collier on
Bankruptcy ¶ 3002.02[1], at 3002-4 (Lawrence P. King ed., 15th ed.
1995) (noting that Rule 3002 complements Sections 501 and 502).
The Second Circuit, in addition to the majority, relied on
Section 726 rather than Sections 501 or 502 to invalidate Rule
3002. See Vecchio, 20 F.3d at 557-58. Unlike the majority or the
Second Circuit, the Ninth Circuit invalidated the bar date based on
its absence from §§ 501 and 502. See Pacific Atl. Trading, 33 F.3d
at 1067. Noting that untimeliness was not listed in § 502(b) as a
reason for disallowing a claim, the Ninth Circuit considered the
bar date's absence telling because § 57n of the Bankruptcy Act had
barred untimely proofs of claims. Id. at 1066-67. The Ninth
Circuit's reasoning is faulty, however, because untimeliness is a
procedural bar that Congress properly omitted from the substantive
exceptions of § 502(b). Further, we do not accept arguments that
would effect a major change in the bankruptcy laws from pre-Code
3
"The Rules of Bankruptcy Procedure will set the time
limits, the form, and the procedure for filing, which will
determine whether claims are timely or tardily filed." H.R.Rep.
No. 595, 95th Cong., 1st Sess. 351 (1977); S.Rep. No. 95-989,
95th Cong., 2d Sess. 61 (1978), reprinted in 1978 U.S.C.C.A.N.
5787, 5847, 6307.
15
practice without some signal from Congress. Dewsnup v. Timm, 502
U.S. 410, 419, 112 S.Ct. 773, 779, 116 L.Ed.2d 903 (1992); see
also Keene Corp. v. United States, --- U.S. ----, ----, 113 S.Ct.
2035, 2041, 124 L.Ed.2d 118 (1993) (requiring a change in the
underlying substantive law to be clearly expressed).
The panel majority relies instead on § 726 to invalidate Rule
3002. This is a Chapter 13 case, however, not a Chapter 7 case.
Subtitle II of Chapter 7, which includes § 726, applies only to
Chapter 7 cases. 11 U.S.C. § 103(b); see In re Stuart, 31 B.R.
18, 20 (Bankr.D.Conn.1983) (refusing to apply § 726(a)(3) to
Chapter 13). It is quite clear that § 726 does not apply to
Chapter 13.
The requirement that a Chapter 13 plan of reorganization
provide creditors with at least what they would receive in Chapter
7 does not obliterate § 103(b).4 Section 1325(a)(4) is a Chapter
13 provision. It instructs a bankruptcy judge to gauge the Chapter
13 plan against what a creditor would receive in Chapter 7.
Section 1325(a)(4) refers generally to Chapter 7, but makes no
express reference to § 726. It makes little sense to subvert §
103(b) by using the general reference in § 1325 to incorporate the
specific language of § 726 into Chapter 13.
The majority invalidates the bar date totally rather than
distinguish between Chapters 7 and 13. But solid reasons exist for
4
As of the effective date of the plan, the value of a plan's
payment of an allowed unsecured claim must be "not less than the
amount that would be paid on such claim if the estate of the
debtor were liquidated under chapter 7 of this title on such
date." 11 U.S.C. § 1325(a)(4) (1988).
16
drawing this distinction. In a Chapter 13 case, the debtor
maintains his assets, and a plan governs its payments to creditors.
Finality is vital so that a court can determine whether the plan
satisfies the Chapter 7 baseline requirement. Chavis, 47 F.3d at
824; Tucker, 174 B.R. at 743. Further, the court must be aware of
all claims so that it can determine whether the debtor will able to
make all the payments required by the plan. Chavis, 47 F.3d at
824; Zimmerman, 156 B.R. at 199; see 11 U.S.C. § 1325(a)(6)
(1988).
In contrast, Chapter 7 takes the debtor's nonexempt assets and
divides them among the creditors in accordance with § 726. If any
assets are left over, § 726(a)(6) returns them to the debtor. It
would be inequitable for a debtor to obtain assets from a
liquidation over a creditor who files a tardy proof of claim.
Tucker, 174 B.R. at 742. Consequently, § 726(a)(2)(C) and (a)(3)
are two equitable exceptions to the bar date; they allow creditors
who file tardy proofs of claims to step in line ahead of the
debtor. Id.; see Chavis, 47 F.3d at 824.
Despite the valid justifications for applying the bar date in
Chapter 13 but not in Chapter 7, the majority refuses to draw an
"extra-textual" distinction. Ante at 107 n. 6. But the majority
sees the distinction from the wrong side of the fence. I am not
suggesting that we apply Chapter 5's provisions inconsistently;
rather, the specific provisions of Chapter 7 modify the general
provisions of Chapter 5 in Chapter 7 cases. See Nobelman v.
American Sav. Bank (In re Nobelman), 968 F.2d 483, 488 (5th
17
Cir.1992) (applying specific language of Chapter 13 over general
language of Chapter 5 in Chapter 13 case), aff'd, --- U.S. ----,
113 S.Ct. 2106, 124 L.Ed.2d 228 (1993). Therefore, Rule 3002's bar
date applies except when modified by the specific language of
Chapter 7.
In sum, I do not agree that Section 726 invalidates the bar
date in Chapter 13. "[B]ar dates establish the universe of
participants in the debtor's case...." In re Kolstad, 928 F.2d
171, 174 (5th Cir.), cert. denied, 502 U.S. 958, 112 S.Ct. 419, 116
L.Ed.2d 439 (1991). They promote a policy of administrative
efficiency and practicality that would be upset if they were not
enforced. Tucker, 174 B.R. at 743. The vast majority of courts
considering whether to apply the bar date in a Chapter 13 case have
applied the bar date. See id. at 739 nn. 14-15 (listing cases);
8 Collier on Bankruptcy ¶ 3002.05, at 3002-17. Nevertheless, the
majority strikes down the presumptively valid Rule in this case by
using an inapplicable statute. With that, I respectfully disagree.
Fortunately, Congress's addition of a timeliness bar to §
502(b) will soon render the majority's analysis obsolete.5 The
majority ultimately reaches the same result that I do, though, so
I concur in the judgment.6
5
See Bankruptcy Reform Act of 1994, Pub.L. No. 103-394, §
213(a), 108 Stat. 4106, 4125-26 (1994), codified at 11 U.S.C.A. §
502(b)(9) (West Supp.1995).
6
I am not quite sure how the majority reaches its final
result. The plan, not Section 726, governs distribution to
creditors in Chapter 13. A plan must satisfy requirements other
than § 1325(a)(4) in order to be confirmed by the bankruptcy
court. E.g., 11 U.S.C. § 1322(a)(2) (1988) (requiring deferred
18
but full payment of § 507 priority unsecured claims unless
creditor agrees to different treatment); id. § 1325(b)(1)
(requiring the debtor to pay an allowed unsecured creditor who
objects to the plan at least what it can from the debtor's
disposable income); id. § 1329(a)-(b)(1) (permitting allowed
unsecured creditor to request postconfirmation modification of
the plan so that it conforms with § 1322). Therefore, I do not
see how the placement of the IRS's claim in § 726(a) determines
the outcome of this case.
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