certiorari to the U.S. Court of Appeals for the 6^th Circuit

A bankruptcy court may not equitably subordinate claims on a categorical basis in derogation of Congress's priorities scheme.

Pioneer Inv. Services Co. v. Brunswick Assocs. Ltd. Partnership, 113 S.Ct. 1489 (1993). (Justice White) (5:4)

http://supct.law.cornell.edu/supct/html/91-1695.ZS.html

certiorari to the U.S. Court of Appeals for the 6^th Circuit

Late filed claims may be allowed as a result of "excusable neglect." A determination of whether respondents' failure to timely file was excusable should focus upon whether the neglect of respondents and their counsel was excusable.

Gran v. Internal Revenue Service, 964 F.2d 822 (8^th Cir. 1992)

The debtor and the Internal Revenue Service disputed whether the debtors' investment was a sham, and whether the IRS had mets its burden of production with respect to its proof of claim. The Court stated that a transaction will not be given effect according to its form if that form does not coincide with the economic reality and is in effect a sham. The presence or absence of economic substance is determined by viewing the objective realities of the transaction, namely, whether what was actually done is what the parties to the transaction purported to do. In addition, the Court held that under 11 U.S.C. § 502, a proof of claim filed in a bankruptcy proceeding is deemed allowed unless a party in interest objects, and a party correctly filing a proof of claim is deemed to have established a prima facie case against the debtor's assets. The objecting party must then produce evidence rebutting the claimant or else the claimant will prevail. If, however, evidence rebutting the claim is brough forth, then the claimant must produce additional evidence to prove the validity of the claim by a preponderance of the evidence.

United States v. Zieg (In Re Zieg), 206 B.R. 974 (D. Neb. 1997)

Confirmation does not preclude reconsideration of the Internal Revenue Service's allowed claim on the debtor's objection. Debtor admitted that 1986 income tax return was fraudulent. The IRS filed a proof of claim that was allowed, and the plan was confirmed to pay all priority claims in full. After confirmation, debtors objected that tax claims were not priority claims. Bankruptcy and district courts agreed that the IRS claim was a tax specified in 11 U.S.C. § 523(a)(1)(C) and thus was not entitled to priority under 11 U.S.C. § 507(a)(8)(A)(iii). IRS argued that 11 U.S.C. § 1327(a) and confirmation precluded debtor's object to its claim. 11 U.S.C. § 502(j) provides that a claim that has been allowed or disallowed may be reconsidered for cause. A motion for reconsideration can be filed at any time before the case is closed. The bankruptcy court may consider a 11 U.S.C. § 502(j) motion even after a chapter 13 plan has been confirmed.

In Re Zieg, 194 B.R. 469 (Bankr. D. Neb. 1996). aff'd United States v. Zieg (In Re Zieg), 206 B.R. 974 (D. Neb. 1997)

Taxes for 1986 were assessable in a chapter 13 case filed in 1992 because taxing authority proved that embezzled income was greater than 25% of the income actually claimed in 1986. Tax claims for willfully omitted income and for filing fraudulent returns are nondischargeable in chapter 7 under § 523(a)(1)(C), but are dischargeable in chapter 13 at the completion of payments under a plan. Because of the exception in § 507(a)(8)(A)(iii), such claims are not entitled to priority in a chapter 13 case, aff'd, 206 B.R. 974 (D. Neb. 1997).

In Re Geringer, Neb. Bkr. 99:50 (Bankr. D. Neb. March 4, 1999) (Judge Mahoney) (Chapter 13)

http://www.nebar.com/bankruptcy/Geringer.htm

Debtor's amended objection to the interest portion of the claims filed by a purchaser at a tax certificate sale was overruled. Pro se debtor provided no statutory or case law authority for his position that purchaser at a tax sale may not continue to receive the benefit of the statutory rate of 14% from and after the date of the tax sale. The Court held that the law remains the same in 1999 as it was in 1894 when the Nebraska Supreme Court decided Adams v. Osgood, 42 Neb. 450, 650 N.W. 869.

Laughlin v. Jensen, 148 B.R. 315 (D. Neb. 1992), Neb. Bkr. 92:542, remand Neb. Bkr. 92:288 (Urbom, J.)

Carr I In Re Carr, 134 B.R. 370 (Bankr. D. Neb. 1991), Neb. Bkr. 93:123 (Judge Minahan)

The Court concluded, "as a general matter, that if an amended proof of claim is filed after confirmation of a Chapter 13 plan and after the court has entered an order allowing claims, the amended proof of claim does not become an allowed claim unless the moving party makes a motion to reconsider claims under Bankruptcy Rule 3008, or takes some other appropriate action.…in Nebraska, once the original claim has been allowed by court order, another court order is required to allow an amended claim."

Carr II United States of America v. Carr, 142 B.R. 351 (D. Neb. 1992), Neb. Bkr. 92:56, affirming In Re Carr, 134 B.R. 370 (Bankr. D. Neb. 1991) (Judge Warren K. Urbom).

The appellant/creditor/IRS of Carr I appealed the Bankruptcy Court's decision disallowing an amended proof of claim by the IRS and discharging the debtor's obligation to the IRS for income taxes for the 1985 tax year. The District Court stated that neither the Bankruptcy Rules nor the Bankruptcy Code supports the appellant/IRS assertion that the amended claim has "automatic" effect absent objection by the debtor. The IRS should have moved for reconsideration of its claim or taken some action before the debtor completed payments under the plan.

[There was an interesting turn of events. Both the Bankruptcy Court and District Court assumed that all payments had been made under the plan. However, early on in the case the Trustee had filed a motion for some trustee fees. The Bankruptcy Court had specifically reserved ruling on the issue at that time but retained jurisdiction over that issue in its order of July 1, 1991. That meant that debtor had not completed making payments under the plan. Hence, this District Court ruling and the Bankruptcy Court's deferred decision gave the IRS another chance.

Carr III In Re Carr, 159 B.R. 538 (Bankr. D. Neb. 1993), Neb. Bkr. 93:545 (District Judge Richard Kopf). 

The issue before this court was: what is to be done when there is an ambiguity in the plan such that a statement in the confirmed plan provides that the debtor will pay 100% of all priority claims, yet the amount and number of payments provided for in the plan do not yield enough money to accomplish what the plan provides.

The District Court explained Local Bankruptcy Rule 27 adopted after In Re Stein, 63 B.R. 140 (Bankr. D. Neb. 1985) and found that the amounts set forth in the Trustee's Motion to Allow Claims govern the amount of the priority claims here. The Trustee's fees were set forth in that motion, and the debtor never objected to them so they were properly allowed.

The Court stated that the special claims of the Standing Chapter 13 Trustee constituted a priority claim pursuant to 11 U.S.C. § 507. The confirmed Chapter 13 plan unequivocably stated in section II that the "claims entitled to priority under 11 U.S.C. § 507 shall be paid in full…." A debtor is not entitled to a discharge order in a Chapter 13 case until "after completion by the debtor of all payments under the plan…." See 11 U.S.C. § 1328(a). On the facts of this case, the debtor had completed making the $100 per month payments provided for in the plan, yet the debtor had not paid the claims entitled to priority under 11 U.S.C. § 507.

Since those priority claims had not been paid, the Court concluded that the Bankruptcy Court was correct and that the debtor was not entitled to a discharge order pursuant to 11 U.S.C. § 1328. Since the 11 U.S.C. § 507 claims had not been paid, payments under the plan had, in fact, not been completed. Therefore, the plan could be modified pursuant to 11 U.S.C. § 1329 to provide for payment of the unpaid section 507 claim.

In Re Swan, 98 B.R. 502 (Bankr. D. Neb. 1989) 

Court used Estus factors and denied confirmation of a three-year plan that paid attorney's fees in full and $90 toward unsecured debt of approximately $14,000. The major unsecured claim in this case arose out of assault and battery. The Court also ruled that fees for debtor's counsel are administrative expenses allowed under 11 U.S.C. § 503, entitled to priority under 11 U.S.C. § 507, and entitled to full payment under 11 U.S.C. § 1322.

In Re Dunn, 83 B.R. 694 (Bankr. D. Neb. 1988) 

Although 11 U.S.C. § 1302 incorporates 11 U.S.C. § 704(6) and requires that the trustee, if advisable, oppose the discharge of the debtor, the trustee lacks standing to oppose the dischargeability of a specific claim.

In Re Stein, 63 B.R. 140 (Bankr. D. Neb. 1985). 

Plan and order of confirmation do not constitute objections to proof of claim. Where plan and confirmation order value creditor's collateral below the amount stated in the creditor's proof of claim, the proof of claim controls.