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Bankruptcy Court Denies Creditor Proof Of Claim Post-Confirmation

Posted By admin || 4-May-2010

Post-Confirmation Claim DeniedIn the Chapter 13 bankruptcy case of Dortch, Eric D. and Dawn R.; In re, the bankruptcy court sustained the trustee's objection to a secured proof of claim that was amended after confirmation of the debtors' bankruptcy plan.

The details of the bankruptcy case:

In 2006, the debtors purchased a 2003 Lexus GX470. The installment purchase contract and the lien were acquired by Citifinancial Auto Credit Inc. On Nov. 11, 2007, the debtors filed for Chapter 13 relief. On Nov. 26, Citifinancial filed a secured claim in the amount of $42,040. The debtors' plan provided for payments to be made directly to Citifinancial. However, the debtors defaulted and the creditor obtained stay relief. After repossessing and selling the car, Citifinancial filed an amended proof of claim for the unsecured deficiency of $23,897. By amending its claim postconfirmation, the creditor sought to participate in the plan. The trustee objected to allowance of the amended claim, arguing that it was barred by plan confirmation. The court noted that the plan made no provision for payment of Citifinancial's claim and that if allowed to share in the dis­tribution to unsecured creditors, the return on unsecured claims would fall from 100 percent to about 34 percent.

The bankruptcy court went on to emphasis that it would not be a sound decision to allow the amendment of the creditor's claim after the confirmation because of its negative impact on unsecured creditors.

"The claimant accepted treatment under the plan as fully secured. It filed its original claim accordingly. The only justification the claimant now gives for amending its claim is that Debtors did not perform as to the claimant as required by the plan. This is insufficient to support allow­ance of the amended claim," the court said.

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