Overstreet v. Foust
Filing
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OPINION AND ORDER: The judgment of the bankruptcy court is AFFIRMED. Signed by Judge Philip P Simon on 11/30/2021. (jdb)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION at LAFAYETTE
IN RE:
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TERRY ALBERT FOUST,
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Debtor.
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BETTY OVERSTREET,
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Appellant/Creditor,
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v.
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TERRY ALBERT FOUST,
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Appellee/Debtor.
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Appeal from the U.S. Bankruptcy Court
Northern District of Indiana
No. 4:21 CV 50 PPS
OPINION AND ORDER
Terry Foust sought bankruptcy protection under Chapter 13 of the bankruptcy code, and
Betty Overstreet tried to file a proof of claim as one of Mr. Foust’s creditors. The bankruptcy
judge held that Overstreet was at least one day late in filing her proof of claim, and he therefore
disallowed the claim as untimely. Overstreet now appeals that decision. Because of the
importance of maintaining strict filing deadlines in the processing of Chapter 13 petitions, even
claims that are filed one day late must be disallowed. Neither equitable tolling nor excusable
neglect applies in this area of the law because a more flexible approach could lead to chaos in the
administration of Chapter 13 bankruptcies which are often complex pieces of litigation. For this
reason, and others discussed below, the holding of the bankruptcy court disallowing the claim
will be AFFIRMED.
Factual Background
On November 18, 2020, Terry Foust filed a voluntary Chapter 13 Bankruptcy petition in
the Hammond Division at Lafayette. [DE 1-2 at 7.] In the years leading up to the bankruptcy
petition, Foust and Betty Overstreet had been enmeshed in litigation in Illinois, and Overstreet
was therefore a potential creditor in Foust’s bankruptcy. As a result, Overstreet hired counsel in
Indiana with the intention of filing a proof of claim in the bankruptcy case. The same day as the
Chapter 13 petition was filed, the bankruptcy court set a claims deadline for January 27, 2021.
Id. In the bankruptcy world, that is a hard deadline. As discussed below, it is not subject to
excusable neglect or equitable tolling.
On the day the proof of claim was due with the court (January 27, 2021), Overstreet’s
counsel “requested for privilege for electronic filing” with the bankruptcy court. [DE 3-1 at 23.]
Evidently, he had never practiced in that court and therefore did not have access to file
electronically at that time. Id. For reasons that are not entirely clear, the privileges were not
immediately granted to Overstreet’s counsel. Id. There is no evidence in the record that
Overstreet’s counsel sought help with his ECF application or that he attempted to travel to the
courthouse in Lafayette to manually file the proof of claim. Instead, counsel sought to meet the
deadline another way–through certified mail. Id. Using a postage machine in his office, counsel
paid the postage that was due and the machine stamped the date of “January 27, 2021" on the
envelope, and he then placed it in the outgoing mail in his office. [DE 3-1 at 41-42.] But the
envelope containing the proof of claim wasn’t postmarked by the U.S. Postal Service until the
following day – January 28th. [DE 3–1 at 37.] The proof of claim actually arrived at the Clerk’s
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Office in Lafayette on February 1, 2021, and that is the date it was file-stamped by the Clerk.
[DE 3-1 at 65.]
As COVID-19 ravaged the nation throughout 2020 and into 2021, courts around the
country scrambled to deal with the effects of the pandemic on litigation. Many courts, including
our own, issued general orders to keep litigation moving forward as expeditiously, efficiently
and safely as possible. Overstreet claims that a couple of General Orders issued by this Court are
especially important to this case. [DE 3 at 5.] First, he points me to General Order No. 2020-20
titled In Re: Court Operations Under the Exigent Circumstances Created by COVID-19, which
states that “[f]or those persons without access to the Court’s electronic filing system, all filings
for the District Court and Bankruptcy Court matters must be submitted via United States Mail to
the relevant divisional mailing address.” N.D.Ind. General Order No. 2020-20 at 4. But this
order was only issued because at that time “the divisional locations of the United States District
Court for the Northern District of Indiana, including the United States Bankruptcy Court . . . ,
REMAIN CLOSED TO THE PUBLIC until July 6, 2020 . . .” Id. (All caps and emphasis in the
original). Id. at 3-4. This General Order, by its very terms, expired on July 6, 2020, and, in any
event, was superseded at least six more times prior to the date Overstreet’s proof of claim was
due on January 27, 2021, and none of those subsequent General Orders made any reference to
the Bankruptcy Court. See N.D.Ind. General Orders Nos. 2020-29; 2020-32; 2020-35; 2020-39;
2021-03; 2021-04.
The second order that Overstreet points me to is General Order No. 2021-04 titled In Re:
Closing of Court Facilities Under the Exigent Circumstances Created by COVID-19, which
states that the Clerk’s Office is open during normal business hours only by telephone and email
and otherwise closed to the public . . . If a filing is mailed by a non-prisoner, the filing date shall
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be deemed to be the postmark date.. . .” Id.1 This General Order, by its clear terms, made no
reference to the Bankruptcy Court, its operations or its Clerk’s Office. But according to
Overstreet, this General Order created a “mail box rule in the U.S. District Court” for the filing
of materials with the Court. [DE 3 at 7.] And since the Bankruptcy Court is part of the U.S.
District Court of the Northern District of Indiana, Overstreet claims that this General Order
essentially supersedes the Federal Rules of Bankruptcy Procedure and allows a proof of claim to
be received by the Court after the deadline so long as it is postmarked before it. [DE 3 at 7.]
Ruling from the bench, Chief Judge Grant disallowed Overstreet’s proof of claim finding
that it was tardy. [DE 3-1 at 44-47.] At the outset of his ruling, Judge Grant accepted as fact that
Overstreet’s Counsel couldn’t get registered as an ECF filer, despite the fact that he waited until
the last day to attempt to do so. Id. at 44-45. But in any event, even assuming counsel couldn’t
file the proof of claim electronically, Judge Grant held that mailing on the deadline was not a
timely substitute, because the Bankruptcy Court has always operated on the principle that
“filing” means receipt by the court. Id. at 45. Judge Grant found that the district court’s General
Orders relating to the closing of Court facilities due to COVID-19 had no bearing on the case
because they did not explicitly reference the Bankruptcy Court. Id. Judge Grant noted that the
Bankruptcy Clerk’s Office remained open throughout the pandemic and stood ready and able to
accept paper filings. Id. at 44. What’s more, as Judge Grant noted, even for “after business
hours’ filings, the Bankruptcy Court . . . has an emergency filing line.” [DE 3-1 at 44.]
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Overstreet calls this General Order No. “2021-22", but I cannot locate a General Order
with that cause number affixed to it. [DE 3 at 7.] I presume she means to say “General Order No.
2021-04" inasmuch as that was the General Order relating to access to the Courthouse that was
in place at the time of her filing of the proof of claim. General Order No. 2021-04 also contains
the language Overstreet quotes and the expiration date she refers to. [Id.]
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Therefore, Judge Grant found that the law was clear that a proof of claim had to be “received by
the Court” in order to be timely filed, and since the proof of claim in this case wasn’t received
until February 1, it was five days late. Id. at 45.
Finally, Judge Grant found that even if the district court’s General Order somehow were
to trump the Federal Rules of Bankruptcy Procedure which set a hard deadline for the filing of a
proof of claim, Overstreet’s filing was still tardy. Id. at 45-46. That is because it was not
postmarked by the U.S. Postal Service until January 28th thus making it one day late even under
Overstreet’s conception of things. Id. The proof of claim was therefore disallowed, and this
appeal followed.
Discussion
Appeals from an order of a bankruptcy court are reviewed by district courts for clear
error if they relate to factual matters, and de novo if they are legal conclusions. In Re Kempff,
847 F.3d 444, 448 (7th Cir. 2017).
In a Chapter 13 case, Federal Rule of Bankruptcy Procedure 3002(a) states that a
“creditor must file a proof of claim . . . to be allowed.” And claims must be filed with the Clerk
of Court where the case is pending. Fed.R.Bankr.P. 3002(b). The filing must be received by the
Clerk, not just put in the mail. In re: Sunland, Inc., 536 B.R. 920, 928 (Bankr.D.N.M. 2015)
(quoting In re Nimz, 505 F.2d 177, 179 (7th Cir. 1974) (“It is true that mailing alone does not
constitute filing, but that filing requires delivery and receipt by the proper party.”) (citing United
States v. Lombardo, 241 U.S. 73 (1916)); In re Mangum, 2006 WL 3626775, at *2
(Bankr.N.D.Ill. Dec. 7, 2006) (“Filing occurs when the document is placed in the possession of
the clerk”). As one court recently put it. “[A]pplying the mailbox presumption to the mailing of
a proof of claim would complicate, bring uncertainty, and cause delay to the bankruptcy claims
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process.” In re N. Carolina New Sch. Inc., 2020 WL 6891915, at *3 (Bankr.M.D.N.C. Oct. 26,
2020). Thus, service of documents on opposing parties is not to be confused with the filing of
documents with the Clerk. Reliance on the mails is entirely proper for the former, but not for the
latter. Chrysler Motors Corp. v. Schneiderman, 940 F.2d 911, 914 (3rd Cir. 1991).
The filing deadlines for proofs of claim in Chapter 13 bankruptcy cases are as rigid as a
schoolmarm. Why such a mechanical approach is necessary is a question that was effectively
addressed by the Amicus in this case, the Standing Chapter 13 Trustee, Ms. Debra Miller. [DE
7.] Unlike run-of-the-mill litigation, Chapter 13 proceedings have a lot of moving parts. There is
both a legal and burdensome administrative component to processing a Chapter 13 petition. As
Trustee Miller explained, “Because of the high volume of pleadings in any given Chapter 13
bankruptcy, there is a need for bright-line rules to ensure that the system works without giving
preference to any class of creditors while minimizing the costs for litigants who are by
definition, not solvent.” Id. at 6. In other words, it’s binary; your filing is either timely, or it is
not. To hold otherwise would be to introduce substantial uncertainty into an already complicated
endeavor. In re Griffis, 31 B.R. 279, 281 (Bankr.D.Vt. 1983).
For its part, the Seventh Circuit has laid down a clear rule: “A debtor may object– and a
court must disallow the claim– if the creditor’s proof of claim is not timely filed.” In re Pajian,
785 F.3d 1161, 1163 (7th Cir. 2015)(emphasis added). A more flabby approach would “wreak
havoc on the ability of the debtor and bankruptcy court to assemble and approve an effective
plan[.]” Id. at 1164. What I take from this is there is no room for ambiguity; a proof of claim
filed one day late, is still just plain late. And the concept of excusable neglect does not apply in
this situation. The Seventh Circuit put that to rest over a decade ago when it found, given the
reasons discussed above, that excusable neglect relative to objections to late-filed claims is only
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available in Chapter 11 cases. In re marchFIRST, Inc. 573 F.3d 414, 417, n.1 (7th Cir. 2009)
(citing In re De Vries Grain & Fertilizer, Inc., 12 F.3d 101, 105 (7th Cir. 1993)).
All of which brings us back to Overstreet’s proof of claim. Waiting to do things at the
last moment can cause problems. It fails to take into account the risk that last minute hiccups
might derail things. This case proves that point. For starters, it is entirely unclear why counsel
waited until the last day to attempt to register as an ECF user in this district. Electronic filing is
now the norm in federal court and has been that way for nearly two decades. See F.R.Bankr.P.
5005(a)(2)(A) and Advisory Committee Notes to 2018 Amendments. Counsel surely knew the
inflexibility of the deadline for filing a proof of claim. What’s more, when counsel found out that
his registration request wasn’t tended to immediately by the Clerk of Court, nothing prevented
him from seeking assistance from the Clerk of Court via the emergency helpline that Judge Grant
referenced, or simply driving to the Bankruptcy Court in Lafayette and filing the proof of claim
in the Clerk’s Office. [DE 3-1 at 44.]
Instead, counsel now relies on the district court’s General Order – an Order issued due to
COVID-19 concerns – which does not even specifically reference the Bankruptcy Court. That
General Order says that non-prisoners may submit filings via mail and they are deemed filed on
the date they are postmarked. See N.D. Ind. General Order No. 2021-04. To accept Overstreet’s
position, one would have to believe that the District Court’s General Order somehow superseded
the Federal Rules of Bankruptcy Procedure, and in particular Rule 3002(a) and (b) which govern
the timing and filing of proofs of claim. That strikes me as a stretch. And at least one judge has
agreed that a district court’s general order issued due to COVID-19 concerns did not supersede
the Federal Rules of Bankruptcy Procedure. See In re Somogye, 2020 WL 4810805, at *13
(Bankr. N.D. Ohio July 8, 2020).
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But let’s look past all this and assume that the General Order somehow altered the
Federal Rules of Bankruptcy Procedure by allowing for a filing of the proof of claim via the mail
and that the filing date is the postmark date. Even then, I am at a loss to see how that gets
Overstreet anywhere. As Judge Grant pointed out, the postmark date is the date the U.S. Postal
Service receives and stamps the letter. It is not the date that counsel’s postage machine stamps
it. While I take at face value that counsel did not purposely misdate the postage meter inside his
office, to allow the filing date to be subject to the influence of the person doing the filing could
well lead to mischief. The more objective approach is to use the date the Postal Service affixes to
the envelope. That is both sensible and the norm. As the Seventh Circuit has noted, in the tax
world, when a “petition bears both a private and U.S.P.S. Postmarks, the U.S.P.S. postmark
trumps the private meter postmark.” King v. C.I.R., 207 Fed.Appx. 681, 682 (7th Cir. 2006);
Tilden v. Commissioner of Internal Revenue, 846 F.3d 882, 885-87 (7th Cir. 2017) (when there
are competing postmarks, a private postmark versus the Postal Service’s, the Postal Service
postmark governs). In this case, where the envelope reflects both a private postmark (January 27)
and a Postal Service postmark (January 28), the Postal Service’s postmark governs. [DE 3-1 at
37.] And that makes Overstreet’s proof of claim a day late.
In sum, a lot of things get blamed on COVID-19 these days. Overstreet’s missed deadline
can’t be one of them. Giving her the benefit of every doubt still leads us to the same conclusion.
In other words, even assuming that her reading of the district court’s General Orders was proper,
and I don’t think it was, her proof of claim was still late. Overstreet’s proof of claim was
postmarked one day past the filing deadline and was received by the Bankruptcy Court five days
late. It was untimely and the Bankruptcy Court was correct in sustaining the debtor’s objection
and denying Overstreet’s claim.
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ACCORDINGLY:
The judgment of the bankruptcy court is therefore AFFIRMED.
SO ORDERED.
ENTERED: November 30, 2021.
/s/ Philip P. Simon
PHILIP P. SIMON, JUDGE
UNITED STATES DISTRICT COURT
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