In re Washington, 581 B.R. 150

In 2004 Carolina Procurement executed a $200,000 note to the City secured by an unrecorded mortgage; Gary Washington and his wife executed an absolute guaranty secured by personal property.
Debtor (Gary Washington) and his wife filed multiple bankruptcies (Chapter 11 in 2009 and 2011; Chapter 11 again in 2014; Chapter 13 in 2016). The City filed proofs of claim in several cases as an unsecured creditor.
The Second Chapter 11 plan (confirmed 2011) treated the City as a general unsecured creditor and provided ~15% dividend; the City later issued a Form 1099‑C showing $157,911.29 as discharged (reason noted: “Bankruptcy”).
City Council minutes refer to amounts being “written off” and internal accounting treatment; City continued collection activity and filed subsequent proofs of claim.
Debtor objected in the Chapter 13 case arguing the debt was cancelled (1099‑C and council minutes) and barred by South Carolina’s 3‑year statute of limitations. The bankruptcy court held an evidentiary hearing.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether issuance of Form 1099‑C or City Council minutes cancelled the guaranty	1099‑C and minutes show City discharged/"wrote off" debt	1099‑C was IRS reporting due to bankruptcy; "write off" was internal accounting and City continued collection	Court: 1099‑C + minutes insufficient; debt not cancelled
Whether the guaranty claim is time‑barred under SC statute of limitations	Breach of contract action barred by SC 3‑year limit (accrued June 2010)	Claim not time‑barred because (a) guaranty not sealed or mortgage‑backed (so 3‑yr applies), but statute was tolled by automatic stays of serial bankruptcies; tolling plus §108(c) preserved City's rights	Court: tolling during bankruptcies extended limitations to June 8, 2016; Debtor filed May 30, 2016, so claim timely
Whether the City’s proof of claim lacks required support or misstates amount	Debtor asserts claim amount/supporting documents incorrect (raised later)	City submitted witness testimony explaining computation; claim filed and previously allowed in earlier case	Court: Debtor did not properly pursue these arguments here; Court credited City’s witness and allowed claim as filed

In re Harford Sands, Inc., 372 F.3d 637 (4th Cir. 2004) (initial burden on claimant; debtor rebuts prima facie validity of timely proof of claim)
F.D.I.C. v. Cashion, 720 F.3d 169 (4th Cir. 2013) (Form 1099‑C alone does not prove debt cancellation)
In re Varat Enters., Inc., 81 F.3d 1310 (4th Cir. 1996) (confirmation order gives rise to final judgment and bars collateral attack on allowed claims)
Covert v. LVNV Funding, LLC, 779 F.3d 242 (4th Cir. 2015) (confirmation order preclusion principles)
In re Zinchiak, 406 F.3d 214 (3d Cir. 2005) (automatic stay constitutes statutory prohibition that can toll limitations periods)
In re Zilka, 407 B.R. 684 (Bankr. W.D. Pa. 2009) (accounting charge‑offs do not equal legal forgiveness of debt)

Result: Debtor’s objection to the City’s proof of claim was overruled and the claim was allowed as filed.