JERROLD N. POSLUSNY, JR., Bankruptcy Judge.
The issue presented is whether a partially secured creditor who fails to file a proof of claim may cast a ballot on account of its deficiency claim if that claim is not included on Schedule E/F. American Heritage Federal Credit Union ("AHFCU"), a partially secured creditor, objected to the Combined Plan of Reorganization and Disclosure Statement (the "Plan") filed by Stephanie's Too, LLC ("Debtor"), arguing, in part, that it should be allowed to cast a ballot on account of its deficiency claim. Debtor's response argues that AHFCU may not vote on the Plan because it did not file a proof of claim asserting the unsecured amount. For the reasons discussed below, the Court concludes that AHFCU may cast an unsecured ballot on the Plan because it has an allowed unsecured claim.
On November 8, 2018, Debtor filed a petition for relief under Chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). Before the petition date, CWA Properties, LLC ("CWA"), a party related to Debtor, obtained a loan from AHFCU in the amount of $430,393.50. The loan was secured by personal property, real property, and commercial guaranties from Debtor, its principals, and Stephanie's Restaurant Lounge, LLC, an entity affiliated with Debtor. Debtor later borrowed $135,000.00 from AHFCU. The loan was secured by similar property and guaranties. Debtor defaulted on both loans. In September 2018, AHFCU obtained a judgment in the amount of $609,687.47.
Debtor's Scheduled D — Creditors Who Have Claims Secured by Property, and List of Creditors Holding 20 Largest Unsecured Claims (the "Top 20 List") identify AHFCU as holder of a secured claim of $2,500.00 and an unsecured claim of $607,187.47 and do not state that the claim is contingent, unliquidated, or disputed (collectively referred to as "Undisputed"). AHFCU was not listed on Schedule E/F — Creditors Who Have Unsecured Claims. The bar date for filing claims was March 20, 2019. AHFCU did not file a proof of claim.
Debtor filed the Plan on September 3, 2019. AHFCU submitted two ballots rejecting the Plan, one as a Class 1 secured creditor; the other as a Class 2 unsecured creditor. AHFCU also objected to the Plan, arguing
In its response and in the Certification of Ballots, Debtor argues that AHFCU's Class 2 ballot should not be considered because it did not file a proof of claim on account of the deficiency. Debtor acknowledges AHFCU's claim was included on Schedule D as undisputed but argues that only applies to the secured portion of the claim. Debtor argues that since it did not identify AHFCU as an unsecured creditor on Schedule E/F, AHFCU had a duty to file a proof of claim to pursue a deficiency claim. Debtor disagrees with AHFCU's position that the Top 20 List acknowledges AHFCU as holding an allowed unsecured claim. Citing to Rules 1007(b) and (d) and section 521, Debtor argues that the Top 20 List is not a schedule because the Top 20 List and bankruptcy schedules are distinguishable. Finally, Debtor argues
At a hearing on November 21, 2019, the Court asked the parties to brief whether AHFCU had to file a proof of claim even though its claim was scheduled as undisputed on Schedule D. The parties agreed that this issue should be resolved prior to addressing other confirmation issues. Both parties filed initial and response briefs.
Section 501(a) of the Bankruptcy Code permits a creditor to file a proof of claim. 11 U.S.C. § 501(a). A claim filed under section 501(a) is deemed allowed unless a party objects. 11 U.S.C. § 502(a). The claims process is treated differently in Chapter 11 cases than in cases under Chapter 7, 12, or 13. Rule 3002(a) governs the timing and filing of claims in Chapter 7, 12, and 13 cases, whereas section 1111(a) and Rule 3003 govern the claims process in Chapter 11 cases.
In a Chapter 11 case, a proof of claim is deemed filed under section 501 if the creditor is listed in the debtor's schedules as Undisputed. 11 U.S.C. § 1111(a). In
Rule 3003 governs the filing, timing, and effect of claims in Chapter 11 cases.
On the other hand, if a claim is not scheduled or is scheduled as contingent, disputed, or unliquidated, a creditor must file a proof of clam.
The Bankruptcy Code and Rules provide that if a claim is scheduled as Undisputed it is deemed allowed in a Chapter 11 case. The Bankruptcy Code and Rules do not state that a claim is only deemed filed as the same type of claim as it was scheduled. For example, section 1111(a) states that a claim is deemed filed if it "appears in the schedules filed [unless it] is scheduled as disputed, contingent, or unliquidated." 11 U.S.C. § 1111(a). Section 1111(a) does not state that a claim scheduled as a secured claim on Schedule D will only be deemed a filed secured claim, but not as any other type of claim.
Similarly, Rule 3003(b) states that "[t]he schedule of liabilities filed pursuant to § 521(1) of the Code shall constitute prima facie evidence of the validity and amount of the claims of creditors, unless they are scheduled as disputed, contingent, or unliquidated." Fed. R. Bankr. P. 3003(b). As with section 1111(a), Rule 3003(b) does not distinguish between which schedule the creditor's claim appears. If a claim is scheduled as undisputed, it is prima facie valid, not just valid as the type of claim scheduled (i.e., secured or unsecured). Moreover, Rule 3003(c)(2) only requires a creditor to file a claim if its claim is not scheduled or is scheduled as disputed, contingent, or unliquidated.
Based upon the language of the Bankruptcy Code and Rules, the Court concludes that if a creditor's claim is scheduled as Undisputed, the entire claim is deemed filed and allowed, not only the portion that corresponds to the schedule in which the creditor was listed.
The Instructions for Bankruptcy Forms for Non-Individuals (the "Instructions") provide support for the Court's conclusion. The Instructions direct a debtor not to include a deficiency claim on Schedule E/F if the party is already listed on Schedule D:
As discussed above, Debtor scheduled AHFCU's claim on Schedule D, listed the total amount of the claim and the amount that is secured, and stated that the claim was Undisputed. Because AHFCU's claim was scheduled as Undisputed, its entire claim is allowed under section 1111(a) and Rule 3003 — not just the secured portion of the claim.
The cases cited by Debtor in support of its position
Because AHFCU's claim was scheduled as Undisputed and being partially secured and partially unsecured, AHFCU was not required to file a proof of claim on account of either the secured or unsecured portion of the claim, and the claim is allowed as scheduled. Therefore, AHFCU's Class 2 ballot must be counted when determining if Debtor has sufficient votes to confirm the Plan.