469 B.R. 599
Bankr. W.D. Pa.2012Background
- Debtors filed for Chapter 7 on February 23, 2011, initiating proceedings in the Western District of Pennsylvania.
- Two adversary proceedings were filed May 18, 2011 by the Chapter 7 Trustee to avoid an unrecorded mortgage and to avoid preferential transfers totaling $2,966.16.
- Summary judgment was entered January 23, 2012 in favor of the Trustee in both adversary actions, with judgment in the preference action against First Horizon for $2,966.16.
- On February 7, 2012, First Horizon filed a proof of claim for an unsecured amount of $103,428.01 related to the unrecorded mortgage.
- The Trustee objected, arguing the claim should be disallowed under § 502(d) and that the unsecured claim was tardily filed under § 726(a)(3), since the general unsecured claims bar date had passed.
- First Horizon argued it did not have an unsecured claim until January 23, 2012 when the lien was avoided, so it could file within the 30-day window of Rule 3002(c)(3).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the claim was timely under § 726(a)(2) vs (a)(3) | Trustee | First Horizon | Claim timely under 726(a)(2) due to Rule 3002(c)(3) window |
| Effect of lien avoidance on unsecured claim status | Trustee | First Horizon | Lien avoidance created unsecured claim eligibility within 30 days |
| Applicability of Rule 3002(c)(3) to secured creditors who become unsecured after judgment | Trustee | First Horizon | Rule 3002(c)(3) applies; timely unsecured filing permitted after final judgment |
Key Cases Cited
- PCFS Financial v. Spragin (In re Nowak), 385 B.R. 799 (6th Cir. BAP 2008) (secured lien avoidance permits unsecured proof within 30 days after final order)