IN RE: GRAY CASE NO. 92-51967
UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF KENTUCKY
IN RE: GRAY
CASE NO. 92-51967
This case was heard by the court on May 27, 1994, on the objection of the chapter 13 trustee to the allowance of the claim of the Internal Revenue Service in the amount of $4,000 filed herein on December 23, 1993. The claim is for estimated income tax liability of the debtor for the tax periods ending 12/31/90 and 12/31/91. The trustee objects to the allowance of the claim on the ground it was filed after the last day for filing claims as fixed by Rule 3002(c), Federal Rules of Bankruptcy Procedure.
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The debtor did not list the IRS as a creditor in Schedule E or F to the petition. The debtors plan filed with the petition makes no provision for the payment of any claims entitled to priority under section 507 of the Code as mandated by 11 U.S.C. § 1322(a)(2). The IRS did not receive notice of the § 341 meeting, of the last day for filing claims, or of the hearing on confirmation of the plan.
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The IRS argues that Rule 3002(c), which fixes a cutoff date for filing claims, and Rule 3002(a), which provides that a claim must be filed in accordance with the rule to be allowed, are inconsistent and in conflict with § 502(b) of the Bankruptcy Code, 11 U.S.C. § 502(b).
The IRS contends there is no provision in § 502(b) for disallowance of a claim that is not timely filed. This court has declined to adopt this contention. In re Crocker, 159 B.R. 790 (Bankr. E.D. Ky. 1993); In re Caudill, 91-51438, unreported ruling by Judge Lee, June 25, 1993. Section 502(b)(1) provides for disallowance of a claim that is unenforceable under "applicable law." The Federal Rules of Bankruptcy Procedure approved by Congress pursuant to title 28 U.S.C. §§ 2072, 2074, and 2075 constitute "applicable law." Matters listed by Congress to be dealt with by the Rules of Bankruptcy Procedure include the specification of the time with respect to filing a proof of claim and the procedure for objecting to the allowance of a proof of claim. House Report No. 95-595, 95th Cong. 1st Sess., pgs 293-308. In Patterson v. Shumate, 112 S. Ct. 2242 (1992), the Supreme Court held that the phrase "applicable nonbankruptcy law" includes federal as well as state law. The phrase "applicable law" is equally if not more inclusive and obviously includes the Federal Rules of Bankruptcy Procedure.
Rule 3002 provides that an unsecured creditor must file a proof of claim in accordance with the rule for the claim to be allowed. To be filed in accordance with the rule a claim must be filed within 90 days after the first date set for the meeting of creditors called pursuant to § 341 of the Code. There are exceptions, none of which apply.
The IRS is an unsecured creditor of the debtor. 11 U.S.C. § 101(5), 101(10), 101(12), 506. The fact that an unsecured claim of the IRS may enjoy priority in payment under 11 U.S.C. § 507(a)(7) does not alter the fact that the IRS is an unsecured creditor of the debtor.
Section 726 of the Code, 11 U.S.C. § 726, is applicable only in chapter 7 cases. 11 U.S.C. § 103(b). Section 726 provides due process to creditors entitled thereto by permitting allowance "as if timely filed" of tardily filed unsecured claims of omitted or improperly scheduled creditors. Such creditors are also protected by 11 U.S.C. § 523(a)(3) in chapter 7 cases involving individual debtors. Section 726 as implemented by Rule 3002(c)(6) permits subordinated distribution on tardily filed dischargeable unsecured claims to prevent return of surplus funds to the debtor.
In a chapter 13 case, omitted creditors, such as the IRS in this case, are protected by the fact their claims, not having been provided for by the plan, remain fully collectible after the case is concluded. 11523(a)(3) in chapter 7 cases involving individual debtors. Section 726 as implemented by Rule 3002(c)(6) permits subordinated distribution on tardily filed dischargeable unsecured claims to prevent return of surplus funds to the debtor.
In a chapter 13 case, omitted creditors, such as the IRS in this case, are protected by the fact their claims, not having been provided for by the plan, remain fully collectible after the case is concluded. 11 U.S.C. § 1327(c), 1328(a). Thus the due process concerns discussed in U.S. v. Cardinal Mine Supply, Inc., 916 F.2d 1087 (6th Cir. 1990) are not implicated. Omitted creditors are not denied any substantive or property rights. At most, their right to collect their claims is abated until the chapter 13 plan payments are completed.
Unlike Rule 3003(c), which applies in cases under chapters 9 and 11, Rule 3002(c) withholds from the court discretion to extend the time for filing claims in cases under chapters 7, 12 and 13. Rule 9006(b)(3).
The trustees objection to allowance of the claim of the IRS for prepetition taxes for the years 1990 and 1991 is sustained. However, the discharge granted to the debtor upon completion of the plan will not release the debtor from the obligation to pay the taxes owed to the IRS for those years.
By the court -
Joe Lee, Chief Judge
Ronald E. Butler
Charles H. Keene
Sidney N. White