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* Elixir Indus., Inc. v. City Bank & Trust Co. (In re Ahern Enters., Inc.), 507 F.3d 817 (5th Cir. Nov. 2007) (Jolly, J.)
Does the disallowance of an unsecured priority claim automatically strip a judgment lien when the bankruptcy court allows the claim as a general unsecured claim? During the claims allowance process, the trustee objected to a judgment creditor's proof of claim (initially filed as a priority unsecured claim) because the judgment lien was primed by a bank's first priority lien, leaving nothing to secure the judgment. The bankruptcy court sustained the objection and allowed the claim as a general unsecured claim. Years later, the bank discovered that the title on the same property was clouded by the judgment creditor's abstract judgment lien and sought a declaration from the bankruptcy court that the lien was invalid. The bankruptcy court held that section 506(d) voided the lien when the court sustained the trustee's objection. On appeal, the Fifth Circuit declined to address whether this holding was correct but explicitly questioned its soundness in light of Dewsnup v. Timm, 502 U.S. 410, 415-16, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992) (noting that section 506(d) "only serves to strip liens in cases where a claim secured by the lien itself has not been allowed") (internal quotations omitted). Because the debtor had confirmed a plan prior to converting the case to chapter 7, however, the Fifth Circuit held that section 1141(c) extinguished the judgment creditor's lien and affirmed the bankruptcy court's holding. See infra, Part V.B for a more detailed discussion of section 1141(c).
* In re Rowe Furniture, Inc., 384 B.R. 732 (Bankr. E.D. Va. Mar. 2008) (Mitchell, J.)
Claimant's pleadings sufficed as an informal proof of claim that could be amended after the claims bar date. The debtor in this case had initially filed its case under chapter 11, along with its parent company and one other affiliated entity. The creditor here held claims against the debtor's estate, but only filed claims in one of the related cases and waited until after the claims bar date to file its proofs of claims in this debtor's case.28 The court noted that the filing of a proof of claim in a related case, standing alone, did not constitute an informal proof of claim in the debtor's bankruptcy case, no matter how closely related the two cases may be. In this case, however, the circumstances were such that the informal proof of claim doctrine should be invoked. Before the debtor's case was converted to a chapter 7 (and thus before the claims bar date), the creditor filed an objection to the proposed sale of the debtor's assets. In that pleading, the creditor explained that it had purchased a number of claims from other creditors and therefore held a number of claims against the debtor's estate. The creditor finally filed its proofs of claims in the debtor's case about one month after the bar date, leaving the claims susceptible to objection. The court held, however, that the creditor's objection to the section 363 sale acted as informal proofs of claim that was later amended by the filing of formal proofs of claim.
