Barbara M. Barron
Stephen W. Sather
Barron & Newburger, P.C.
7320 N. Mopac Expwy., Suite 400
Austin, TX 78701
The goal of filing a proof of claim is to collect money. However, errors in submitting claims can prove costly. Six different problems to avoid are illustrated below.
Failure to Attach Supporting Documentation
Cases Prior to 2011
B-Line, LLC v. Wingerter (In re Wingerter), 594 F.3d 931 (6th Cir. 2010)
Creditor filed a proof of claim without supporting documentation. The creditor withdrew the claim after the debtor objected. The Court then issued an order to show cause directing the creditor to explain its business practices and the handling of this specific claim. The Court found that B-Line violated Fed.R.Bankr.P. 9011 because it did not make a reasonable pre-filing inquiry that the claim was valid and supported by the evidence. However, because the creditor cooperated in response to the order to show cause, the Court did not assess sanctions. On appeal, the Court found that the controversy was not moot even though no monetary sanctions were assessed. The Court found that the creditor could appeal a non-monetary sanction to avoid injury to its reputation. The Court reversed the bankruptcy court’s sanctions order. It found that because the creditor obtained warranties from the entity from whom it purchased the debt as to its validity and had a track record of purchasing claims from this buyer that were not objected to 99.5% of the time, the creditor had done a reasonable pre-filing inquiry.