Court: United States Bankruptcy Court, M.D. Georgia; April 26, 2013; Us Bankruptcy; United States Bankruptcy Court
Debtor filed a Chapter 13 bankruptcy case on July 11, 2012, listing unsecured debts totaling $100,448 on Schedule F, while proofs of claim for unsecured debts amounted to $100,974.96. A Chapter 13 plan proposing full distribution to unsecured creditors was confirmed on December 3, 2012. Prior to confirmation, Debtor objected to seven proofs of claim, totaling $49,482.77, filed by claimants who asserted they were assignees of the original creditors, requesting disallowance of these claims.
Debtor argued that the claims were not enforceable under Georgia law, that he owed no money to the creditors, that the creditors were not the real parties in interest, and that the documentation failed to meet Rule 3001 and Official Form 10 requirements. Debtor also submitted interrogatories and requests for production of documents regarding the claims' chain of assignment, but received no responses from the claimants.
At a hearing on February 11, 2013, only Debtor's counsel attended, while the claimants were absent. The Court accepted Debtor's testimony stating he had no agreements or communications with the claimants and had no knowledge of owing them money. The claims included details of the creditors, amounts, account numbers, and corresponding debts scheduled by Debtor. Notably, Claim 8 involved Quantum3 Group LLC for $814.67, and Claim 9 involved Back Bowl I LLC for $14,953.13, each with relevant account information and corresponding debts listed in Debtor's Schedule F.
Claim 10 identifies Back Bowl I LLC, Series C as the creditor, with a claim amount of $573.54. The last four digits of the account number are 8467. The debtor's scheduled account lacks specific information. Attachments include an account summary revealing the debtor's name, a partially redacted social security number, an account balance, an open date of June 1, 1994, a last payment date of May 7, 2012, a last payment amount of $75, a last purchase date of May 28, 2012, and CitiBank as the issuer. The corresponding debt on Schedule F lists Citi Card, account number 8467, at $494.00.
Claim 11 lists Portfolio Recovery Associates, LLC as the creditor, claiming $18,580.40 with the last four digits of the account number being 8224. The debtor may have scheduled this account under Capital One, NA. Attachments include an account summary with the debtor’s name and details showing Portfolio Recovery Associates as the account owner, Capital One, NA as the original creditor, and the date of loan as July 11, 2003. The last payment was made on May 18, 2012, with a charge-off date of August 9, 2012. A limited power of attorney designating PRA Receivables for filing proofs of claim and a bill of sale dated September 21, 2012, confirming the transfer of accounts from Capital One Bank to Portfolio Recovery Associates, are also included. The corresponding debt on Schedule F is listed as Capital One, account number 8224, at $18,246.
Claim 12 outlines Portfolio Recovery Associates, LLC as the creditor with a claim of $5,871.28 and the last four digits of the account number as 7924. The debtor may have scheduled this account as Sears Gold Mastercard. Attachments consist of an account summary showing Portfolio Recovery Associates as the account owner, with the original creditor listed as Sears Gold Mastercard. The loan date is June 1, 1993, with the last payment on May 11, 2012, and a charge-off date of August 15, 2012. Similar to Claim 11, a limited power of attorney and a bill of sale dated September 27, 2012, recognizing the sale from Citibank to Portfolio Recovery Associates are included. The corresponding debt on Schedule F is noted as Sears Card, account number 7924, at $5,717.
Claim 13 specifies Portfolio Recovery Associates, LLC as the creditor, claiming $2,246.67 with the last four digits of the account number as 0899. The debtor may have scheduled this under Chase Bank USA, NA. Attachments include an account summary with the debtor’s name, confirming Portfolio Recovery Associates as the account owner, and Chase Bank USA, NA as the original creditor. The loan date is June 16, 2002, with a last payment on May 23, 2012, and a charge-off date of September 11, 2012. A limited power of attorney and a bill of sale dated October 25, 2012, confirming the transfer from Chase Bank USA to Portfolio Recovery Associates are also included. The corresponding debt on Schedule F is designated as Chase, account number 0899, at $2,182.
Claim 15 involves Portfolio Recovery Associates, LLC, as the creditor, with a claim amount of $6,443.08 related to an account previously held by Chase Bank USA. The last four digits of the account number are 8278. The debtor may have listed this account under Chase Bank USA, NA. The attachments supporting the claim include:
1. An account summary detailing the debtor's name, Portfolio Recovery Associates as the account owner, and Chase Bank USA, NA as the original creditor, along with critical account dates (loan date: January 13, 1997; last payment: May 18, 2012; charge-off: September 11, 2012).
2. A limited power of attorney granting PRA Receivables the authority to file claims on behalf of Portfolio Recovery Associates in bankruptcy court.
3. A bill of sale from October 25, 2012, documenting the transfer of receivables from Chase Bank USA to Portfolio Recovery Associates, signed by representatives of both entities.
4. A copy of a statement from June 2012.
The debtor's corresponding debt on Schedule F lists the amount as $6,257. The legal issue concerns whether the claims should be disallowed under 11 U.S.C. 502(b)(1) due to a lack of documentation showing the assignment of the claim. The court finds that the proofs of claim are sufficient to establish prima facie evidence of their validity and amount, and the debtor did not provide adequate evidence to dispute this. Consequently, the court will overrule the debtor’s objections and allow the claims. The claims process is governed by 11 U.S.C. 502 and Federal Rule of Bankruptcy Procedure 3001, which stipulate that a filed proof of claim is generally allowed unless contested and falls under specific exceptions. The rules also require that claims based on written agreements must include the original or a duplicate of the writing, and the relevant amendments to Rule 3001 were effective December 1, 2012, with the prior version in effect during the filing of the claims in question.
Rule 3001(c) has been amended to include a new subsection (c)(3) specific to claims from open-end or revolving consumer credit agreements, such as credit card claims. This rule mandates that, aside from claims governed by paragraph (3), any claim based on a writing must include a copy of that writing with the proof of claim. For claims under subsection (c)(3), a statement must be filed, detailing specific information about the account, including: the name of the entity from whom the creditor acquired the account, the name of the original creditor, the date of the last transaction, the date of the last payment, and the date the account was charged to profit and loss. Additionally, upon written request, the holder of such a claim must provide a copy of the relevant writing within 30 days.
The rationale for this amendment is to clarify claims that may have changed hands multiple times before the debtor's bankruptcy, helping the debtor recognize the claim. A properly executed proof of claim per these requirements serves as prima facie evidence of the claim's validity and amount. The amendment does not apply to claims under paragraph (1) of subdivision (c). The Supreme Court's order on April 23, 2012, confirmed these amendments, which took effect on December 1, 2012, governing all bankruptcy proceedings thereafter. The official Form 10 was also updated to reflect these changes, requiring documentation or statements as outlined in the new rule.
Under the prior version of Rule 3001, assignees of credit card claims were required to attach the original writing supporting their proof of claim to establish its prima facie validity. The current version simplifies this requirement, allowing assignees to provide a summary of relevant data sufficient for debtors to identify the claim. The court must determine which version of Rule 3001 applies to the debtor's objections, noting that Rule 3001 pertains to claims procedures rather than substantive law. Amendments to procedural rules are generally applied retroactively if the proceedings were pending when the amendments took effect and if such application is just and practicable.
The claims allowance process is designed to ensure fair and efficient resolution of claims, emphasizing simplicity and minimizing obstacles for legitimate creditors. Insufficient documentation alone cannot disallow a claim absent a challenge under 502(b). Courts have recognized that excessive burdens on creditors can deter them from contesting objections, even when claims are valid, leading to potentially unfair outcomes for debtors. The court highlights that debtors might exploit documentation requirements to unjustly challenge claims, especially when they have admitted to incurring the debt.
Debtor's objections, filed on November 28, 2012, were pending when the amended rule became effective on December 1, 2012. The court finds that applying the amended Rule 3001 is both just and practicable, as it aligns with the goal of streamlining the claims process while preserving the debtor's right to challenge claims on substantive grounds. Finally, Rule 8001(f) states that a properly executed proof of claim serves as prima facie evidence of its validity and amount, establishing a presumption in favor of allowance.
The objecting party must rebut the presumption of claim allowance by presenting facts that have equal probative force to the allegations in the proofs of claim. If this presumption is successfully rebutted, the burden of proof shifts to the claimant under relevant non-bankruptcy law. Claims based on open-end consumer credit agreements are presumed valid if they comply with specific requirements outlined in Rule 3001(c)(3) and related subsections.
For claims to be valid under subsection (c)(3)(A), they must include an attached statement detailing: the transferee's name, the original creditor's name at the last transaction, the last transaction date, the last payment date, and the charge-off date. Additionally, claims must substantially conform to Official Form 10, be executed by the creditor or an authorized agent, provide itemized statements of interest and fees, and be filed by the claim's transferee.
Claim 8 meets all requirements except for the last transaction date, listing MOMA Funding LLC as the current creditor and GE Money Bank as the original creditor. The last payment date is 5/4/2012, and the charge-off date is 8/13/2012. The claim is executed by an authorized agent and includes $70 in interest/fees. Additional identifying information is provided, including account balance and last four digits of the account number.
Claim 9 meets all requirements except for the charge-off date, with Back Bowl I LLC, Series C as the creditor and CitiBank as the issuer. The last purchase date is December 29, 2011, and the last payment date is June 1, 2012. The claim includes $55 in interest and $563.60 in fees and expenses. It is executed by an authorized agent and filed under the name of Back Bowl I LLC, Series C, with additional identifying information provided.
Claim 10 indicates that all requirements are met except for the charge-off date. Back Bowl I LLC, Series C is identified as the transferee and CitiBank as the creditor at the time of the last transaction. The last purchase occurred on May 28, 2012, with the last payment made on May 7, 2012. An account summary, compliant with Rule 3001(c)(3)(A), is attached, executed by the creditor’s authorized agent. The summary includes interest of $55.00 and charges of $27.09. The claim is filed under Back Bowl I LLC, Series C, and additional details provided include the account balance, opening date of the account, last payment amount, and the last four digits of the account number.
Claim 11 also satisfies all conditions except for the date of the last transaction, listing Portfolio Recovery Associates, LLC as the transferee and Capital One, NA as the original creditor. The last payment date is noted as May 18, 2012, with a charge-off date of August 9, 2012. An account summary meeting Rule 3001(c)(3)(A) standards is included, executed by the authorized agent. The summary shows no interest or fees charged. The claim is filed in Portfolio Recovery Associates, LLC's name, with additional identifying information including the account balance, opening date, last four digits of the account number, and a bill of sale for accounts purchased from Capital One Bank.
Claim 12 follows a similar pattern, with Portfolio Recovery Associates, LLC as the transferee and Sears Gold Mastercard as the original creditor. The last payment was made on May 11, 2012, with a charge-off date of August 15, 2012. The claim includes an account summary compliant with Rule 3001(c)(3)(A), executed by the authorized agent, and indicates no interest or fees. Additional information consists of the account balance, the opening date, last four digits of the account number, and a bill of sale for accounts transferred from Citibank, N.A. to Portfolio Recovery Associates, LLC.
Claim 13 and Claim 15 both indicate that all requirements are met except for the date of the last transaction. Portfolio Recovery Associates, LLC is identified as the transferee in both claims, while Chase Bank USA, N.A. is noted as the original creditor. The date of the last transaction is not provided for either claim. Claim 13 states the last payment date as May 23, 2012, and the charge-off date as September 11, 2012, with no interest or fees listed. Claim 15 specifies a last payment date of May 18, 2012, and a charge-off date of September 11, 2012, with an interest amount of $151.00 and fees totaling $35.00. Both claims are filed in the name of Portfolio Recovery Associates, LLC and include details such as account balance, account opening date, last four digits of the account number, and a bill of sale from Chase Bank USA, N.A. to Portfolio Recovery Associates, LLC.
The court finds that the proofs of claim meet the prima facie validity requirements under Rule 3001(f), which allows for substantial compliance with applicable rules. Rule 3001(c) specifically excludes credit card claims from needing to file the original writing upon which the claim is based and requires the creditor to provide the name of the selling entity and other identifying information. The intent of the new disclosure requirements is to help the debtor associate the claim with a known debt. While some information is missing from the proofs of claim, it does not hinder the debtor's ability to recognize the debt, and the additional information provided in the account summaries aids in this identification, demonstrating substantial compliance with Rule 3001's spirit.
Claims filed by creditors are presumed valid, and the burden lies with the Debtor to provide evidence that rebuts this presumption. In this instance, the Debtor's sole evidence consists of personal testimony denying any agreement with the claimants and claiming a lack of notice or knowledge of the claims, which is insufficient to counter the prima facie validity established by the proofs of claim.
In the case of In re Davis, the debtor objected to claims due to absence of documentation showing a contractual relationship with the claimant, despite having scheduled a similar claim. The court determined that the objection was based on documentation insufficiency under Bankruptcy Rule 3001, not on substantive grounds, concluding that the documentation provided met the rule's requirements and thus upheld the claims' prima facie validity.
Similarly, in another case, despite the debtor's lack of recognition of the original creditor, the court upheld the claim because it matched a scheduled debt based on account numbers, and the debtor failed to provide evidence to substantiate any claim of exception under 502(b). In a related case, a debtor's assertion of not being responsible for debts listed as joint with a spouse also failed to overcome the claims' prima facie validity. Overall, evidence presented by debtors must be compelling enough to match or exceed the probative value of the claims to successfully rebut their validity.
Judge Laney's ruling in *Pursley v. eCAST Settlement Corporation* addressed the validity of three claims for credit card debt filed by eCast as an assignee of Citibank. eCast submitted a proof of claim that matched the scheduled amount and included a blanket assignment of accounts from Citibank, but it lacked the referenced Exhibit 1 and the final electronic file. Ambiguities surrounded the assignment date, although eCast later amended its claim with an affidavit from a Citibank representative detailing the account's transfer information.
The debtor objected, citing insufficient documentation and acknowledging the debt's existence but denying any prior relationship with eCast. The court found two primary issues: the sufficiency of documentation and eCast’s standing under 11 U.S.C. § 502(b)(1). Initially, the claim was presumed valid due to the attachments provided, but the debtor's testimony, which indicated no prior dealings with eCast, overcame this presumption. The court emphasized that to rebut presumptive validity, the objector must negate at least one essential allegation of the claim, such as proving the claimant's assignment under state law.
Despite the close nature of the case, the court was influenced by the debtor's disadvantage in proving a negative regarding the assignment, especially given eCast's refusal to provide assignment records. Consequently, the burden shifted to eCast to demonstrate a valid assignment under Georgia law, which the court found eCast could not do based on the evidence presented. The court concluded that the documentation attached to the proof of claim was insufficient to establish a valid assignment.
No copies or printouts of the outside sources were submitted, and the assignment documents referenced unidentified accounts and debtors for unspecified amounts. The court upheld the objection to the claim, emphasizing that bankruptcy cannot serve as a shortcut for claims that cannot be proven in other contexts. It stated that creditors cannot exploit the Bankruptcy Code's expedited claims process to collect on claims unprovable under state law. The author disagrees with Pursley on two main points. First, the debtor's testimony denying any agreement or knowledge of the claim does not sufficiently rebut the evidentiary presumption of validity of a proof of claim. Under contractual principles, notice of assignment is not essential for its validity between assignors and assignees. Additionally, filing a proof of claim carries criminal penalties for perjury, indicating a serious assertion of ownership over the debt. Mere ignorance of the assignment is insufficient to challenge the claim's validity; evidence such as another entity filing a claim for the same debt could effectively rebut the prima facie validity of the original claim. Second, Pursley’s focus on whether the creditor can demonstrate it is the proper party to enforce the claim under state law is misdirected. Section 502(b)(1) refers to the inherent nature of the claim's enforceability rather than the proof's sufficiency. The legislative history provides examples of unenforceable claims, indicating that unenforceability exists regardless of the claimant's proof abilities. Despite the claims being filed before December 1, 2012, the court decides to apply the current version of Rule 3001, finding that the disputed proofs of claim complied sufficiently to warrant a presumption of validity.
Debtor's testimony regarding unfamiliarity with the assignment of claims and assignees is insufficient to counter the presumption of validity due to several factors: Debtor had previously scheduled a similar debt; the proof of claim provided enough detail to link it to the scheduled debt, including the original creditor's identity; the claim was executed under penalty of perjury; there were no competing claims from the original creditor or any other party; and Debtor did not establish that the claims were unenforceable under nonbankruptcy law. Consequently, Debtor has failed to justify disallowing claims 8, 9, 10, 11, 12, 13, and 15, leading the Court to overrule his objections. An Order will be issued accordingly.
The document also outlines requirements for claims based on writings, including the need to file a copy of the writing with the proof of claim and to provide additional documentation in individual debtor cases, such as itemized statements for interest and charges, and details regarding security interests. Failure to comply with these requirements may result in sanctions, including preclusion of evidence or the awarding of expenses and attorney’s fees. Specific provisions are also included for claims based on open-end or revolving consumer credit agreements, mandating the submission of detailed account information.
Box 7 of Official Form 10 (December 2012) mandates the attachment of redacted copies of documents that substantiate a claim, including promissory notes, invoices, contracts, and documents evidencing the perfection of a security interest if the claim is secured. For claims related to open-end or revolving consumer credit agreements, specific information as required by FRBP 3001(c)(3)(A) must be included. If the claim is secured by the debtor’s principal residence, the appropriate Mortgage Proof of Claim Attachment must accompany the claim. Original documents should not be sent as they may be destroyed post-scanning. If documents are unavailable, an explanation is required.
Instruction 7 reiterates the necessity of attaching redacted documents that demonstrate the debt's existence and any liens securing it, along with documentation evidencing the perfection of security interests and compliance with FRBP 3001(c) for claims related to consumer credit agreements or secured by a debtor's residence. Confidential health care information must be disclosed minimally if the claim pertains to healthcare goods or services.
For claims based on a writing, a duplicate or original must be filed, and if lost, a statement explaining the circumstances is necessary. Additional requirements for individual debtor cases include providing itemized statements for any accrued interest, fees, or charges, a statement of the amount needed to cure any defaults, and necessary escrow account statements if applicable. Failure to provide required information may lead to sanctions, including exclusion of evidence in contested matters and potential award of expenses and attorney's fees resulting from the omission.
Redacted copies of supporting documents for the claim must be attached, including promissory notes, purchase orders, invoices, itemized statements, contracts, judgments, mortgages, and security agreements. If the claim is secured, evidence of perfection of a security interest must also be included. Original documents should not be sent, as they may be destroyed after scanning. For claims based on health care services, confidentiality must be maintained. Courts have differing opinions on whether 11 U.S.C. § 502(b) exclusively governs claim disallowance. In this case, the Debtor seeks disallowance under § 502(b)(1), rendering other grounds unnecessary for consideration. All claims arise from credit card debt, and the 2012 version of Official Form 10 requires claimants to attach documents proving the debt's existence and any necessary documentation per Federal Rules of Bankruptcy Procedure (FRBP) 3001(c). The court clarifies that credit card debts are exempt from the requirement to file a copy of the writing supporting the claim, consistent with FRBP 3001(c)(1). The failure to produce assignment copies does not affect the claims' prima facie validity but may lead to evidentiary exclusion or other relief as prescribed by FRBP 3001(c)(2)(D). The presumption of validity for claims may still arise even if the creditor does not provide the underlying writing, but if successfully rebutted by the debtor, the burden may shift to the creditor to prove their right to enforce the debt.
Rule 3001(c) and Official Form 10 require sufficient documentation for claims, which must substantiate more than just repetitive allegations in the proof of claim. Rule 3001(e) governs the filing of transferred claims, stating that only the transferee or an indenture trustee may file a proof of claim if the transfer occurred before the proof was submitted. If the debtor's argument is upheld, it would create a situation where the original creditor cannot file a claim, while a claim by the assignee could be deemed invalid if the debtor does not acknowledge the assignee. These rules also aim to reduce fraudulent claims by requiring information not typically available in standard schedules or known to individuals unrelated to the credit card account. The excerpt references the consolidation of three similar cases by Judge Laney, focusing primarily on the facts of the Pursley case.
