Southern Florida was historically one of the most active jurisdictions in claim
litigation. Debtors, apparently betting on a creditor's unwillingness to spend
money to defend a claim where repayment was by no means guaranteed, employed
this strategy to disallow thousands of claims, and resultantly millions of
dollars, through this mechanism.
Judicial intervention was rare, as claims were disallowed "by default" if a
creditor did not respond to the objection. If a creditor did respond, the
debtor's objection was typically withdrawn prior to a hearing. Recently, Becket
& Lee scored a major victory in this battle when the Chief Bankruptcy Judge
for the Southern District of Florida ruled that claim objections based solely
on "insufficient documentation" would no longer be granted.
In conformance with what has become the generally accepted majority view, the
Court overruled objections to claims, refusing to disallow them for a putative
lack of sufficient supporting documentation. The court repeated the position
taken by "the vast majority of courts", that a failure to comply fully with the
documentation requirements of Fed. R. Bankr. P. 3001(c) is no basis for
disallowing, or objecting to, a claim. Rather, only the Bankruptcy Code,
particularly 11 U.S.C. section 502(b), provides the grounds for disallowing a
claim, and does not include insufficiency of documentation among them.
As a general matter, a proof of claim may be sufficiently supported by an
account summary and need not include the account agreement or evidence of each
transaction. The court went on to specify its tests for sufficient
First, a claim that is scheduled by the debtor, undisputed, in an amount equal
to or greater than claimed requires little, if any, documentation. To the
debtor who may schedule his debts as disputed in an attempt to force an
unwarranted evidentiary burden on the creditor, the court warned that, "the
term undisputed is not meant to solely relate to how the debt is scheduled, but
rather to the lack of any objection to the merits of the claim".
The court overruled with prejudice objections to claims that corresponded to
scheduled debts depicting identical account numbers and amounts that matched or
exceeded those claimed.
Second, a claim that exceeds the debtor's scheduled amount need only be
supported to the degree it exceeds the amount scheduled.
Third, a claim for an unscheduled debt may, when challenged by a debtor's
objection, require more extensive documentation such as account statements.
Nevertheless, such an objection will not stand if based solely on a lack of
documentation. The court made its sentiment very clear:
[T]his Court will not tolerate attempts to obtain orders
disallowing these claims if the only basis for the objection is lack of
Its patience was worn thin by:
. . . debtors taking advantage of the cost of responding to
claims objections and obtaining orders striking claims which the debtor has
acknowledged owing in whole or in part.
Since this opinion was published, other Judges in Southern Florida have adopted
its reasoning and the volume of objections from this area has, temporarily at
least, slowed to a trickle.
In re Moreno, No. 03-18692-BKC-RAM (Bankr. S.D. Fla. Apr. 13, 2006).
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