Creditors Have to Play by SOME Rules

The Tenth Circuit handed down a decision two days ago reversing its Bankruptcy Appellate Panel and basically finding that at least some rules really do apply to creditors.  Imagine that.

The facts have become routine in virtually every Bankruptcy case in which assets are to be distributed to creditors (i.e. every chapter 13 and some chapter 7’s).  A debt repurchaser, in this case B-Line, LLC filed a claim alleging that it was entitled to be paid for a debt owed to it by the Debtor.  Its claim included the last 4 digits of an account number listed on the debtor’s schedules and an amount that was close to the amount scheduled for that debt.  B-Line claimed to have bought the debt from the former creditor, but it produced no documentation to support the amount of the claim or its ownership of the claim.

The Bankrupty Appellate Panel found some two years ago that B-Line’s claim was sufficient.  Since the claim resembled one included on the Debtor’s schedules,  the schedules essentially constituted prima facie evidence that the claim was accurate and that B-Line owned it.  This ruling few in the face of the statutory requirements that creditors attach documentation to their claims establishing the amount of the claim and the creditor’s ownership of the claim.

The Tenth Circuit has very wisely ruled that the statute means what it says and even debt repurchasers must comply with it.  B-Line’s claim was not sufficient, because it lacked documentation to support it.   Oh, if you want to read the opinion for yourself, it is Caplan v. B-Line LLC (In re:  Kirkland), Case No. 08-2017 (1oth Cir. May 14, 2009)


2 thoughts on “Creditors Have to Play by SOME Rules

  1. Jason Anderson

    It was an interesting decision, but I think time will tell regarding its applicability to Chapter 13 cases.

    The court expressly stated that the trustee is not estopped by the debtor’s statements in their schedules as argued by the creditor.


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