My colleague at the Bankruptcy Law Network Karen Oakes talks about some reasons a debtor in bankruptcy may want to object to a claim filed in the case. There is another, a real bombshell, arising out of a 9th Circuit Court of Appeals case Siegel 143 F.3d 525.
Siegel addressed a post bankruptcy dispute between the discharged debtor and his mortgage lender. Even though Siegel’s bankruptcy case had been a no asset case, in which there was no practical need to examine the bona fides of the claims filed, the 9th Cir. held that the Bankruptcy Code presumption that a filed claim was allowed, bound the debtor after bankruptcy.
This holding, which seems to me to be a case of bad facts make bad law, is scary in at least two very common fact patterns in bankruptcy. One is the pattern in Siegel, involving the debtor and the mortgage lender. A second could be the Chapter 13 case that is dismissed, either voluntarily or involuntarily. Will an unchallenged claim in a dismissed case be deemed accurate and enforceable against the debtor?
I don’t know, but I’d rather not find out on my watch.