654 B.R. 772
Bankr. E.D. Ark.2023Background
- Debtors James and Wendy Nichols filed Chapter 13 on Nov. 6, 2017; Southern Collections timely filed an unsecured proof of claim for $12,071 on Nov. 15, 2017.
- Proof of claim listed Roberta Cranston (legal manager) as creditor’s agent and gave a Little Rock P.O. Box for notices/payments.
- The Trustee began making plan disbursements to Southern Collections in June 2022; several checks (June–Sept. 2022) were returned with handwritten notes indicating the payee could not process the payments.
- Trustee’s staff learned Southern Collections and First Collection Services had merged, and bankruptcy accounts reportedly were not migrated; Southern Collections did not file a withdrawal or a transfer of claim.
- Trustee objected seeking disallowance on the theory Southern Collections had abandoned the claim; court overruled the objection and directed that unnegotiated disbursements be treated as unclaimed under 11 U.S.C. § 347(a) if unpaid 90 days after final distribution.
Issues
| Issue | Trustee's Argument | Southern Collections' Argument | Held |
|---|---|---|---|
| Whether a creditor’s alleged abandonment disallows an otherwise properly filed proof of claim | Claim should be disallowed because creditor abandoned it (returned checks; statements claiming accounts closed) | Proof of claim remains prima facie valid; no withdrawal or transfer filed | Abandonment is not a §502(b) ground for disallowance; objection overruled |
| Who bears burden to defeat an allowed proof of claim | Trustee offered returned checks and communications to show abandonment | Proof of claim is prima facie evidence; claimant need only defend when objections meet §502(b) grounds | Trustee failed to meet burden to prove any §502(b) exception; claim stands |
| Proper disposition of returned, unnegotiated disbursements | Trustee feared depositing funds into court registry; sought resolution in trustee discretion | Creditor (or successor) remains entitled to funds and could still recover them | If checks remain unpaid 90 days after final distribution, treat funds as unclaimed under §347(a) and deposit into court registry for claimant |
| Whether informal statements by creditor’s agent effected withdrawal/abandonment | Returned-check notes and agent emails indicated accounts closed, implying abandonment | No formal withdrawal or transfer was filed; agent’s authority to disclaim unclear | Informal statements insufficient; proper withdrawal/transfer required under Fed. R. Bankr. P. 3006/3001(e) |
Key Cases Cited
- Sears v. Sears, 863 F.3d 973 (8th Cir. 2017) (Section 502(b) provides exclusive statutory bases to disallow claims)
- In re Dove-Nation, 318 B.R. 147 (B.A.P. 8th Cir. 2004) (proof of claim is prima facie evidence and shifts burden to objector)
- In re Cluff, 313 B.R. 323 (Bankr. D. Utah 2004) (objector must produce some evidence to overcome proof of claim)
- In re McDowell, 578 B.R. 786 (Bankr. M.D. Tenn. 2017) (§347(a) requires deposit of uncashed distributions into court registry after 90 days)