Opinion
No. 76 B 259.
August 18, 1978
Discharge of Debts — Unscheduled Debts — Actual Knowledge
An unscheduled debt may be discharged, pursuant to Section 17a(3), where it is shown that creditor had actual knowledge of the bankruptcy proceeding in time "to allow a creditor to prove his claim and to avail himself of an equal opportunity with other creditors to participate in the administration of the affairs of the estate."
The court first refused to accept bankrupt's argument that notification of bankruptcy proceedings mailed to the New York City Department of Finance in its capacity as tax creditor of the bankrupt constituted notice or actual knowledge to the plaintiff, New York City Department of Social Services, in its capacity as creditor for overpayment of Medicaid claims. Although both departments are municipal agencies of New York City, the court stated that the bankrupt has the responsibility of informing each separate agency of outstanding debts.
But, the court then went on to find that the plaintiff did have actual knowledge of the proceedings in bankruptcy trustee had sent a letter notifying the agency of the proceeding and its representative responded, thus indicating receipt of the letter. The court noted that such receipt must, as it did here, occur in time for the creditor to file his claims. See Sec. 17a(3) [§ 523(a)(3)] at ¶ 9229.
Proof of Claims — Informal Claim — Untimely Claims — Equity
A letter from a creditor describing a debt but not setting forth an explicit demand is not sufficient to constitute a proof of claim.
Plaintiff contends that its letter to bankruptcy trustee indicating that bankrupt owed it $17,770.14 constituted a valid and therefore timely proof of claim. Under Section 57n of the Bankruptcy Act, claims which are not filed within six months after the first date set for the first meeting of creditors shall not be allowed. If plaintiff's letter did not constitute a valid proof of claim, no written proof of claim has ever been submitted and plaintiff is barred from asserting one at this late date.
It was found that the letter did not constitute valid proof of claim. Bankruptcy Rule 301(2) requires that the creditor or his authorized agent execute a writing "setting forth" the creditor's claim. In the instant case, the letter did not set forth an explicity demand against the estate as is required in an informal proof of claim. The letter failed to meet even a liberal construction of the rule because "[t]he fact remains, however, that someone must set forth a claim, that is make a demand, however obliquely, in the first instance." Here, the letter merely alleged the debt.
Although as a result of the court's refusal to consider the letter to be a valid proof of claim, bankrupt will receive a substantial windfall, the court would not be persuaded by plaintiff's appeal to its equity power. Instead it pointed to the fact that to permit a late filing "would destroy the objective of finality which Congress obviously intended to provide." See Sec. 57n at ¶ 2523 and Rule 301(a) at ¶ 20,101.