17 Aug Objecting to Credit Card Claims in Bankruptcy
It is becoming more common for debtors to receive notification of a proof of claim in their bankruptcy from a party they have never even heard of, let alone dealt with. This often takes the form of a company claiming to have purchased credit card debt from the credit card company after the debtor filed for bankruptcy. In 2005, these companies accounted for $66 billion in credit card debt affecting over 8 million credit card users.
While it is not always important to a debtor whether or not a claim is paid, there are circumstances in which it can have a significant impact. A Chapter 13 plan can be extended or shortened by the number and dollar amount of claims filed. This can also be important in Chapter 11 and 12 cases.
Bankruptcy Rule 3001 governs what the bankruptcy proof of claim must include in order to be â€œadequate as it appears,â€ what courts will often call a prima facie showing. How courts interpret this rule varies greatly; in the case of assigned credit card debt, some courts require only an account statement from the original creditor, with no documentation of assignments, while others require a good deal of documentation. A small but growing number of courts will deny a proof of claim for failing to fully comply with every aspect of the rule (see In re Tran, 369 B.R. 312).
A creditor with a claim that has prima facie status will be paid by the trustee unless someone with an interest in the result presentsevidence against the claim. If no evidence is introduced, the creditorâ€™s claim will be allowed and paid. Consumer debtors are at a disadvantage here. They are being asked to prove a negative with little or no ability to produce this kind of evidence. Consumers rarely keep extensive records of their family purchases.
Look over the proof of claim carefully! Creditors sometimes provide the evidence to defeat their claim within the claim itself. Creditors who buy debt do so in large transactions. Their paperwork gets sloppy. Numbers on one document may not match numbers on another. This kind of mistake isnâ€™t enough to defeat the creditorâ€™s claim on its own, but it is often enough to shift the burden of proof back onto the creditors.
What the creditor has to do from here is a matter of state law, but often the creditor is required to supply the documentsproving the underlying assignment, something these kinds of creditors can rarely do. Many courtsare becoming less sympathetic to assigned creditors when they that canâ€™t document the assignments. As In re Shank (315 B.R. 799) states, â€œthe fact that a partyâ€™s business practices make it difficult to produce evidence to prove its case does not permit courts to ignore evidentiary rules in deciding a disputed matter.â€
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