Bankruptcy – Secured claims – priority – timeliness

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Bankruptcy
Secured claims; priority; timeliness

A senior judgment lien creditor has priority over a junior lienholder, even though it did not file a timely proof of claim.

“[E]ven if the date of the hearing on the Trustee’s Objection to the claim is the determination date, Sacor’s failure to file a claim by the bar date does not result in avoidance of Sacor’s lien for purposes of § 506. Section 506(d)(2) provides: ‘To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless . . . (2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title.’ In other words, if the only reason that Sacor’s claim is not an allowed secured claim is because Sacor failed to file a proof of claim (or, as here, filed a purportedly tardy claim), Sacor’s lien is not void, survives the bankruptcy and should be considered in the § 506 valuation process.”

10-35093 In re Weise

E.D.Wis., Kelley, Bankr. J.