My Attorney Removed A Claim In My Case And Now Its Back!

23 May My Attorney Removed A Claim In My Case And Now Its Back!

So your attorney successfully objected to and got a claim disallowed in your Bankruptcy.  A year later they come back in and want a second bite at the apple.  Can they?

 

Technically, yes.  Under 11 USC 502(j) and Bankrutpcy Rule 3008, the creditor can petition the Court to reconsider the claim.  11 USC 502(j) provides:

(j) A claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case.

Likewise, Bankruptcy Rule 3008 provides:

A party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. The court after a hearing on notice shall enter an appropriate order.

Neither statute has a time frame from which a Motion to Reconsider may be made.  While at first blush it appears that a creditor can come back into the court at any time, Case law generally holds otherwise.

Many cases are following the 9th Circuit case of In re Cleanmaster Industries, Inc., 106 B.R. 628, 1989 Bankr. LEXIS 1868 (B.A.P. 9th Cir. Cal. 1989) which held that a creditor that seeks to have their claim reconsidered after the 10 day appeal time frame, is subject to Rule 60, which generally requires one of the following:

(1) Mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rules 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic) misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment….

So whats the bottom line?  If your claim was objected to and disallowed, and you are past the 10 day appeals time, chances are you will prevail on eliminating the claim again, unless the creditor can provice one of the 6 grounds above.

 

Written by Michael G. Doan

 

 

 

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