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Puerto Rico Bankruptcy Court Denies Creditor's Requests to Amend Proof of Claim

August 22, 2014

In In re Martinez, the United States Bankruptcy Court for the District of Puerto Rico held that a creditor was responsible for its own failure to accurately identify the secured and unsecured portions of its claim and the Chapter 13 trustee did not have to verify the accuracy of the claim as filed by the creditor.

Debtors William A. Ruiz Martinez and Ileana Ortiz Santiago filed their case under Chapter 13 of the Bankruptcy Code on April 18, 2008. The debtors’ proposed plan provided for the surrender of certain shares to creditor Cooperativa de Ahorro y Crédito de Camuy and the payment in full of an unsecured debt with the Creditor in the amount of $20,773.04. The creditor did not object to confirmation of the debtors’ plan.

After the plan was confirmed (in June 2008), the creditor filed a proof of claim under which it identified a secured claim against the debtors in the amount of $19,901.40 (secured by shares and deposits) and an unsecured claim in the amount of $6,916.10. After the Debtors completed payments under their plan (in May 2013), the creditor filed an amended proof of claim under which it inverted its prior identified secured and unsecured claim, with $19,901.40 now identified as unsecured and $6,916.10 identified as secured. The creditor also filed a motion to compel the trustee to recover distributions made to other unsecured creditors and to pay those recovered funds to the creditor on account of its amended unsecured claim. The trustee, meanwhile, filed its final report and moved for the debtors’ discharge as all plan-related payments were complete.

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