In a 13 page decision signed, April 11, 2011, Judge Carey of the Delaware Bankruptcy Court granted a motion disallowing a creditor’s late-filed bankruptcy claim, and held that if there is no legal requirement that a party respond to an affidavit, a lack of response does not bind a party to that affidavit nor can it be considered an admission by that party. Judge Carey’s opinion is available here.
Mr. Muhammad took out a loan from New Century Mortgage Corporation (a “Debtor”) in order to purchase a home. Then, after the loan was sold to another servicer, the Debtor entered bankruptcy. Mr. Muhammad had troubles with the new servicer, and eventually was informed that his home was being foreclosed upon. Opinion at *3.
Mr. Muhammad filed a claim in the bankruptcy case based, in part, on numerous documents with names such as “Affidavit of Truth” or “Statement-of-Specific-Facts” which he had previously filed with the office of his County Register of Deeds. The Debtors never responded to the documents filed with the Register of Deeds, but they did object to Mr. Muhammad’s claim as late-filed.
Judge Carey’s Opinion
Judge Carey addressed the timing of Mr. Muhammad’s claim, then addressed the question of the affect of the affidavits and statements-of-fact filed by Mr. Muhammad.
Timing of Claim Filing
Judge Carey held that because there was no pleading of excusable neglect, nor did Mr. Muhammad claim that he did not receive notice of the bar date, there was no “basis for permitting him to file a late claim.” Opinion at *7-8. The Third Circuit Court held that the bar date “is a drop-dead date that bars all prepetition claimants who received the required notice.” Opinion at *8. There is no room for argument here, if the debtors provided the right notice, either you file on time, or you are out of luck.
Judge Carey cited opinions of the Third Circuit and the Western District of Virginia to support his opinion that there is “no legal authority … that would require the Debtors to respond to the Affidavits and Statements or be bound by their contents for failing to respond.” Opinion at *9. There are only a few specific times when the failure of a person or company to respond to a statement is considered an admission that the statement is true, and there are specific rules governing how the statements have to be phrased to make them binding. Because these conditions were not met in this case, Judge Carey did not consider the Affidavits to be binding on the Debtors.
Before filing papers in court, remember that even if something contains “legalistic language,” it can still be “lacking in any substance,” and just because your opponent doesn’t respond to your claim, it doesn’t make it an admission on their part. See Opinion at *8-9. Lastly, if someone who owes you money enters bankruptcy protection, you MUST file a claim before the bar date. Otherwise you must either convince the court that missing the claims bar date was the result of excusable neglect or risk having your claim disallowed in its entirety.