PRIA, Government Policy, Made Personal

Summary

If a debt or ownership interest is listed on the debtor’s official schedules, it counts as if the creditor filed a claim — unless the schedule says the debt is disputed, depends on something, or the amount is unknown. A debt secured by estate property is usually treated as if the creditor can also go after the debtor personally, even if the creditor actually cannot. A group of similar creditors can instead vote (at least two-thirds in dollar amount and more than half in number of allowed claims in that group) to have their debts treated just as secured up to the amount the court allows. That vote is not allowed if the creditors’ share of the property is of tiny value, or if the creditor can go after the debtor and the property will be sold. Also, if the creditor cannot go after the debtor and the property will be sold, the usual “as if they had personal recourse” rule does not apply.

Title 11, §1111

Bankruptcy, Source: USLM XML via OLRC

(a)A proof of claim or interest is deemed filed under section 501 of this title for any claim or interest that appears in the schedules filed under section 521(a)(1) or 1106(a)(2) of this title, except a claim or interest that is scheduled as disputed, contingent, or unliquidated.

(b)(1)(A)A claim secured by a lien on property of the estate shall be allowed or disallowed under section 502 of this title the same as if the holder of such claim had recourse against the debtor on account of such claim, whether or not such holder has such recourse, unless—

(i)the class of which such claim is a part elects, by at least two-thirds in amount and more than half in number of allowed claims of such class, application of paragraph (2) of this subsection; or

(ii)such holder does not have such recourse and such property is sold under section 363 of this title or is to be sold under the plan.

(B)A class of claims may not elect application of paragraph (2) of this subsection if—

(i)the interest on account of such claims of the holders of such claims in such property is of inconsequential value; or

(ii)the holder of a claim of such class has recourse against the debtor on account of such claim and such property is sold under section 363 of this title or is to be sold under the plan.

(2)If such an election is made, then notwithstanding section 506(a) of this title, such claim is a secured claim to the extent that such claim is allowed.

Notes & Related Subsidiaries

Historical and Revision Notes

Legislative Statements

A discussion of section 1111(b) of the House amendment is best considered in the context of confirmation and will therefore, be discussed in connection with section 1129.

senate report no. 95–989

This section dispenses with the need for every creditor and equity security holder to file a proof of claim or interest in a reorganization case. Usually the debtor’s schedules are accurate enough that they will suffice to determine the claims or interests allowable in the case. Thus, the section specifies that any claim or interest included on the debtor’s schedules is deemed filed under section 501. This does not apply to claims or interests that are scheduled as disputed, contingent, or unliquidated.

Editorial Notes

Amendments

2010—Subsec. (a). Pub. L. 111–327 substituted “521(a)(1)” for “521(1)”.

§1111 Claims and Interests