New bankruptcy court ruling on when a creditor can file late proof of claim
A bankrupt creditor must normally file a proof of claim within a certain time limit, known as a statute of limitations, or his claim must be time barred. Bankruptcy Rule 3002 (c) (6) (A) provides a narrow exception to this rule where a creditor files a petition and “the notice was insufficient in the circumstances to give the creditor a reasonable time to file a claim. proof of claim because the debtor failed to timely file the list of names and addresses of creditors required by Rule 1007 (a). Courts disagree on the meaning of this rule when a debtor timely files a list of names and addresses of creditors (known as the matrix of creditors), but wrongly omits the creditor in question. Can the creditor then avail himself of this provision, or does it only apply when the matrix of creditors is not filed at all on time? On May 25, 2021, the United States Bankruptcy Court for the Southern District of New York ruled in accordance with the old approach, ruling that a known creditor omitted from a creditor matrix may benefit from the bankruptcy rule. 3002 (c) (6) (A) because when the matrix of creditors omits a known creditor, it is not “the list of names and addresses of creditors” that rule 1007 (a) requires.
In January 2020, Helios and Matheson Analytics Inc. (“Helios”) and certain of its affiliates filed for Chapter 7 relief. A Chapter 7 Trustee was appointed (the “Trustee “). Each debtor filed a creditor matrix with their petition, but the creditor matrices and creditor lists omitted KLDiscovery, an eDiscovery company that had provided services to Helios. As such, KLDiscovery did not receive notice of the Chapter 7 petition. The court set June 1, 2020 as the statute of limitations, and the debtors served notice of the statute of limitations, but KLDiscovery did not. was also not among the rated parties. As of February 2020, some KLDiscovery employees have received a bankruptcy notice through their eDiscovery work with Helios, but, KLDiscovery represented, no senior employee with bankruptcy decision-making authority has received such a notice. until October 2020. KLDiscovery filed evidence. claim in February 2021 and sought an order that its proof of claim was timely filed under Bankruptcy Rule 3002 (c) (6) (A) because KLDiscovery was not listed in the matrix of creditors. The trustee opposed the request, arguing that rule 3002 (c) (6) (A) did not apply because a matrix of creditors had been filed in a timely manner, and also arguing that KLDiscovery had had knowledge of the bankruptcy before the deadline because some employees knew of the bankruptcy.
The court sided with KLDiscovery. The court held that Bankruptcy Rule 3002 (c) (6) (A) makes the availability of a remedy conditional on the debtor having timely filed “the list of names and addresses of creditors required by the rule 1007 (a) ”. Rule 1007 (a) in turn requires the debtor to list the creditors listed “in Schedules D, E / F, G and H”, and Schedule E / F requires the debtor to list the creditors. having unsecured debts. This rule implements Section 521 (a) (1) of the Bankruptcy Code, which requires debtors to include, among other things, a list of creditors. Thus, according to the court, the debtor is required to enumerate all known creditors, and a list which does not include all known creditors is not “the list of names and addresses of creditors required by rule 1007 (a ) ”. Any other reading, the court explained, would not give effect to the wording “required by rule 1007 (a)”. The court also invoked the doctrine of constitutional annulment, under which courts avoid interpreting laws in a way that raises constitutional doubts. Here, the foreclosure of a relief by a creditor who received no notice would likely create a due process problem, which would support KLDiscovery’s reading of the rule.
The court also ruled that KLDiscovery had received insufficient notice to give KLDiscovery a reasonable opportunity to file its proof of claim before the deadline. The court explained that the knowledge of an agent is imputed to a principal only when it is linked to the functions of the agent. While some KLDiscovery employees received notice of bankruptcy prior to the statute of limitations, KLDiscovery employees whose duties included bankruptcy were not notified until well after the statute of limitations. Thus, the court ruled that KLDiscovery’s proof of claim was considered filed on time.