What Can I Do If A Creditor Files a False Proof of Claim in my Chapter 13 Bankruptcy Case?
Debtors who file for bankruptcy under chapter 13 of the bankruptcy code are required to make payments to their creditors. Payments are collected by wage deduction or the debtor submitting payments to the Chapter 13 trustee who then submits the payments to your creditors in accordance with the chapter 13 plan you have filed that his been confirmed by the bankruptcy court. Some debts such as mortgage arrears on property you want to keep, most taxes and back child support needs to be paid back 100% through your bankruptcy plan. Other unsecured debts may or may not have to be paid back 100% depending on your income, household size and your means test result. Your bankruptcy attorney can advise you of the actual numbers once you have provided them with a list of your debts and income information.
In order for a creditor to be paid in your chapter 13 bankruptcy case they must file what is called a proof of claim. This consists of a form in which the creditor must attach proof of what debt is owed. The chapter 13 trustee determines if your plan is feasible based on the proofs of claims filed in your case, your means test result, and the debts you listed in your bankruptcy petition. If debts are listed on your bankruptcy petition and a claim has been filed, the trustee will base the amount you owe on the proof of claim filed. The trustee will also count any proofs of claims filed on debts that were not listed in your bankruptcy schedules.
Creditors and debt collectors for the most part are honest about the proofs of claims that they file and they usually match up with the list of debts the debtor has listed. With that said debtors should diligently double check the claims filed in their case as mistakes happen and the burden is on the debtor to take action so that plan payments are not higher than they need to be, or worse cause a plan not to be feasible which could lead to case dismissal or draw an objection to your case from the Chapter 13 trustee’s office.
Recently I have encountered two such issues where false proof’s of claims were filed causing major problems in debtors chapter 13 bankruptcy cases. The first case happened when Midland Credit Management aka Midland Funding Inc. filed a claim for over $12,500 related to a Sears Citi card that was charged off in 2007. Even worse the debtor had filed for Ch. 7 bankruptcy in 2009 and clearly listed this debt on his bankruptcy schedules at that time and received a discharge of his debts including this debt. This meant that the debtor was not obligated to pay this debt and Midland attempted to get paid on it through the current Ch. 13 plan. This is a clear violation of the debtors prior bankruptcy discharge and recent case law has awarded significant punitive damages as well as actual damages and attorney fee’s for similar actions. Unfortunately Midland ignored letters to remedy the problem and then the only way in which to fix a fraudulent proof of claim that is filed is to object to it. Objecting to a claim that is filed allows the debtor to respond to the motion or withdraw/amend the claim properly. In this case Midland again took no action after the objection was filed and the bankruptcy court disallowed the claim. The debtor in this case was of course not pleased and incurred significant emotional distress having to incur additional attorney fee’s, having the trustee attempt to throw out their case due to the fact they were counting the $12,500 claim as debts the debtor had to repay since they were on a 100% repayment plan. The debtor decided to file an adversary bankruptcy case and hold Midland accountable for their actions and violating his prior bankruptcy discharge order. The case is currently pending in the bankruptcy court and hopefully will settle soon.
The second recent proof of claim issue that I had to deal with occurred when Navient Solutions Inc. filed a proof of claim on behalf of Educational Credit Management Services (ECMS) regarding a student loan that my client had with their company. The problem in this case was the Navient filed the proof of claim for $45,555 when the debtor only owed $4,500! A major error like that can cause a major problem for a debtor who is in a chapter 13 repayment plan and is scheduled to pay back 100% of their debts. In trying to resolve this issue I attempted to contact Navient to fix the issue, however they were completely unresponsive and transferred me around stating that they didn’t own the loan even though they are the ones who filed the claim. Luckily ECMS was much more reasonable and was able to amend the claim within a few days of me contacting them. Now everything is back on track and the debtor will only pay what they owe.
So the moral of the story here is that if you are a debtor in a Chapter 13 case be sure to review the claims filed in your bankruptcy case. The chapter 13 trustee on occasion will inform your or your attorney if there is a large debt which was not scheduled in your case, but you know your debts better than anyone. You can keep tabs on your case by checking your case at the National Data Center where you can also review any claims filed in your case. If you notice anything out of the ordinary be sure to inform your attorney so that they can file an objection to the claim on your behalf. It should be noted that creditors have the right to collect penalties, interest, and attorney fee’s so objecting on these grounds in most cases not warranted. The contract or agreement you signed will usually state that these fee’s can be incurred if a delinquency occurs.
If you have additional questions regarding filing for chapter 13 bankruptcy in Washington State, give Symmes Law Group a call at 206-682-7975 to learn about your options.