MARK B. McFEELEY, Bankruptcy Judge.
THIS MATTER is before the Court on the Trustee's Objection to Claim # 15 of NextBank, NA/B-Line, LLC (the "Objection") filed on June 22, 2006. B-Line, LLC filed a Response to the Objection (the "Response"). Having reviewed the Objection, the Response, the applicable statutes, rules and case law, and being otherwise sufficiently informed, the Court will disallow the Claim and in connection therewith finds:
1. Debtor, Patricia M. Kirkland ("Debtor") filed a voluntary petition under Chapter 13 of the Bankruptcy Code on August 22, 2001.
2. "Next Bank, N.A./B-Line, LLC" ("Next Bank/B-Line") filed a proof of claim (the "Claim") on September 25, 2001. The claim identified an account number ending with 2787 and claimed the amount of $5,328.19 as an unsecured non-priority claim for a credit card debt. No supporting documentation was attached to the proof of claim.
3. After the Objection was filed, Line, LLC, as transferee, filed a Notice of Transfer of Claim ("Notice of Transfer") indicating that the Claim was transferred to B-Line, LLC by "Next Card," as transferor. In the Notice of Transfer, B-Line, LLC identified the source of its claim as an account number with the last four digits 2787 in the amount of $5,328.19. No supporting documentation was attached to the Notice of Transfer.
4. On her Schedule F, Debtor listed a debt to "Nextcard" in the amount of $5,004.00 for credit card purchases under same account number as indicated on the Claim. The debt is not identified on Debtor's Schedule F as contingent, unliquidated, or disputed.
5. On September 24, 2001, the Chapter 13 Trustee filed a motion to dismiss based on Debtor's failure to timely file a plan and failure to provide requested documents. Debtor converted her case to Chapter 7 on September 25, 2001, and later reconverted her case to Chapter 13. An Order Confirming Plan was entered on February 14, 2002. The Chapter 13 Trustee did not object to the claim filed by Next Bank/Line, and although the Interim Report filed by the Chapter 13 Trustee reflects that no disbursements were made to unsecured creditors, the Chapter 13 Trustee's Interim Report reflects a claim of "Hold, LLC" in the amount of $5,328.19, which coincides with the amount on the proof of claim filed by Next Bank/B-Line. The Trustee's Final Report states that disbursements to unsecured creditors totaled $2,140.11. Debtor reconverted her proceeding to Chapter 7 on May 7, 2005. (See Docket # 34-Chapter 13 Trustee's Interim Report; Docket # 35-Notice of Voluntary Conversion; Docket # 42-Chapter 13 Trustee's Final Account).
6. A hearing on the Objection was held on November 15, 2006. No evidence was offered by Next Bank/B-Line or the Trustee at the hearing; however, at Next Bank/B-Line's request, the Court took judicial notice of the schedules and statements filed by the Debtor. At the hearing, the Trustee raised an additional argument questioning B-Line, LLC's ownership of the Claim because no supporting documentation was attached to the Notice of Transfer. See
In the Bankruptcy Code, a claim is defined as a "right to payment . . . or . . . right to an equitable remedy." 11 U.S.C. § 101(5). A creditor having a claim may file a proof of claim in a bankruptcy case, and a proof of claim filed pursuant to § 501 is deemed allowed unless a party in interest objects. 11 U.S.C. §§ 501(a) and 502(b). If a party objects, the court, after notice and a hearing; must allow the claim except to the extent that the Court finds one or more of nine grounds for disallowance enumerated in § 502(b), which states in relevant part as follows:
11 U.S.C. § 502(b).
Although the substantive law regarding allowance of claims is provided §§ 501 and 502, the Federal Rules of Bankruptcy Procedure govern the procedure regarding allowance of claims, and the rules should be construed "to secure the just, speedy, and inexpensive determination . . ." of any disputed claims. In re Cluff, 313 B.R. 323, 330 (Bankr.D.Utah 2004), quoting Fed. R. Bankr.P. 1001.
Rule 3001(a) states that a proof of claim is a written statement setting forth a creditor's claim, and a proof of claim shall conform substantially to Official Form 10.
It is undisputed that the Claim is based on a written credit card agreement; therefore, Next Bank/B-Line was required to submit supporting documentation with the Claim. Fed. R. Bankr.P. 3001(c). It is also undisputed that Next Bank/B-Line attached no documents in support of its Claim. The Trustee argues that without documentation, Next Bank/B-Line has failed to present prima facie evidence of its Claim pursuant to Fed. R. Bankr.P. 3001(f); therefore, the Claim should be disallowed in its entirety.
Next Bank/B-Line asserts that the failure to attach documentation, as specified in the Rules, is not one of the exclusive bases for disallowance enumerated § 502(b); therefore, the Court does not have statutory authority to disallow the Claim solely for this reason. According to Next Bank/B-Line, even without supporting documentation, the Claim cannot be disallowed unless the Trustee shows that the claim is subject to disallowance under one of the enumerated reasons in 502(b). Next Bank/B-Line asks this Court to follow the majority of courts that have allowed claims lacking adequate documentation in the absence of further proof that the claim is invalid. See In re Heath, 331 B.R. 424, 434 (9th Cir. BAP 2005) (recognizing the split of authority on this issue). Next Bank/B-Line argues that disallowing claims based on this technical objection alone opens the door for abuse of the claims objection process and interferes with the basic goal of the bankruptcy rules: the just, speedy and inexpensive determination of cases.
The placement of the burden of proof in the claims adjudication process controls the outcome of this case. The ultimate burden of persuasion is on the claimant to establish the validity and amount of its claim by a preponderance of the evidence. In re Relford 323 B.R. 669, 673 (Bankr.S.D.Ind.2004) ("a claimant bears the ultimate burden of establishing the validity and amount of its claim by a preponderance of the evidence."); In re Jorczak, 314 B.R. 474, 481 (Bankr.D.Conn. 2004) (the "burden of persuasion under the bankruptcy claims procedure always lies with the claimant . . ."). A claimant can meet this burden by filing a proof of claim, which is deemed allowed pursuant to § 502(a) unless an objection is filed. 11 U.S.C. § 502(a). Jorczak, 314 B.R. at 481. In the face of an objection; however, the statutory presumption of validity disappears, thus, the burden remains on the claimant to establish its claim. Id. at 482 (noting that failure to establish a prima facie claim means that without an appearance by the creditor, the claim must be disallowed).
Under the rules, a proof of claim filed in accordance with the Bankruptcy Rules constitutes prima facie evidence of the validity and amount of the claim. Fed.
Recently, however, courts looking at similar claims objections have disagreed on whether disallowance is appropriate, In re Relford, 323 B.R. 669, 676 (Bankr. S.D.Ind.2004) ("The Courts that have examined Rule 3001's requirements have not completely agreed as to what penalty to impose, if any, when a claim is deficient under the Rule."). The majority of courts have allowed claims despite objections for lack of documentation because this type of objection is generally viewed as a technical as opposed to a substantive objection. See e.g. In re Habiballa, 337 B.R. 911, 916 (Bankr.E.D.Wis.2006) (noting that debtors who file objections should not be relieved of their obligations on claims based on a "technicality" when debtors have acknowledged the debt on their schedules). In addition, several courts state that sustaining objections for failure to attach documentation would in effect add an additional reason to the exclusive list given in Code § 502(b).
The Court considers many of the cases holding the majority view distinguishable in two important ways: first, the Trustee, not the Debtor, is the objecting party here;
The Court finds the minority approach better suited to the facts presented by this case and finds that the Claim must be disallowed. Next Bank/B-Line presented no documentary evidence with its proof of claim; therefore, the Claim is clearly not entitled to prima facie validity. After the Objection was filed, Next Bank/B-Line was given ample opportunity to produce documentary support for its Claim, yet it relied solely on its proof of claim. At the hearing, Next Bank/B-Line's counsel admitted that no supporting documentation is available. Therefore, Next Bank/B-Line has failed to meet its burden of proof to substantiate its Claim. The Court recognizes that the Claim is similar to the debt listed on the debtor's scheduled debt to Nextcard; however, the Debtor's schedules are not admissible against the Trustee. Moreover, if under these facts, the Court allows the Claim without any supporting documentation in the face the Trustee's objection, the Court will have placed the burden to disprove claims on the Trustee rather than requiring this creditor to establish a right to collect on a valid claim. Cf. Armstrong, 320 B.R. at 104 ("The documentation required by Bankruptcy Rule 3001 and Official Form 10 allows the debtor and the Chapter 13 Trustee to have enough information to fully determine whether or not a valid claim in the proper amount has been filed.").
The Code and Rules balance the interests of debtors and creditors by placing the initial burden on a claimant to come forward with evidence to support its claim. See In re Henry, 311 B.R. at 817-18 (recognizing the balance of interests related to proofs of claim and the shifting burden of proof). The Court will not upset this balance by allowing the Claim without sufficient evidence of its validity.
Next Bank/B-Line was required to present some evidence that it has a valid claim. Failing that, the Claim must be disallowed.
An appropriate order will be entered with this Memorandum, which shall constitute the Court's findings of fact and conclusions of law under Fed. R. Bankr.P. 7052.
Fed. R. Bankr.P. 3001(e)(2). Because the transferor has not objected to the Notice of Transfer, the Court will not consider this argument by the Trustee. See In re Preston Trucking Co., Inc., 333 H.R. 315, 332 (Bankr. D.Md.2005) (noting that under Rule 3001(e) only transferor can object to a transfer of claim after proof of claim filed). Even if an appropriate objection to the Notice of Transfer was filed, the Claim will be disallowed as for failure to present prima facie evidence. Presumably, Next Bank/B-Line will file appropriate documents on future notices of transfer.