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Federal Bankruptcy Rule 9006(b) is the path one must walk to file a late proof of claim in a bankruptcy case. The guidepost for such walking is set forth in Pioneer Inv. Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 388 (1993).
Pioneer examined four factors to consider in determining whether neglecting to file a timely proof of claim is excusable: (a) the danger of prejudice to the debtor; (b) the length of the delay and its potential impact on judicial proceedings; (c) the reason for the delay, including whether it was within the reasonable control of the movant; and (d) whether the movant acted in good faith.
Pioneer also explicitly stated that “Congress plainly contemplated that the courts would be permitted, where appropriate, to accept late filings caused by inadvertence, mistake, or carelessness, as well as by intervening circumstances beyond the party's control.”
Nonetheless, the Pioneer factors have proven to be a hard standard to satisfy. Most courts, when faced with the issue, determine that the standard required to find excusable neglect is not met.
But none of this means a proof of claim should always be filed.
What??? It’s true. How can that be?
Well, do you remember the “rule” that you should never start a sentence with the words “and” or “but?” It was likely driven into your head in elementary school. And it was a good rule then. But only for one reason: you were far more likely to use those words incorrectly than correctly when you were in third grade. And you are not in third grade anymore. At least we assume this to be so. If you are, you’re quite precocious.
The general rule that filing a proof of claim early is subject to exceptions, one of which is presented by circumstances in which a creditor may be better off not filing a proof of claim at all. Read Laura Davis Jones’ Important Issues and Developments When Filing a Proof of Claim to learn more.
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