Kevin Scott Hines and Deborah Corbett Hines

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
GREENVILLE DIVISION
IN RE:
KEVIN SCOTT HINES
DEBORAH CORBETT HINES,
DEBTORS
CHAPTER 7
CASE NO. 09-07264-8-RDD
ORDER ALLOWING CHAPTER 7 TRUSTEE’S FINAL REPORT,
FORM IV - TRUSTEE’S REQUEST FOR COMMISSION
AND REIMBURSEMENT OF EXPENSES, ALLOWING
APPLICATION FOR COMPENSATION OF ATTORNEY FOR
TRUSTEE AND REIMBURSEMENT OF EXPENSES, AND
GRANTING MOTION FOR COMPENSATION OF ACCOUNTANT
Pending before the Court is the Chapter 7 Trustee’s Final Report, Form IV - Trustee’s
Request for Commission and Reimbursement of Expenses, Application for Compensation of
Attorney for Trustee and Reimbursement of Expenses, and Motion for Compensation of
Accountant by John C. Bircher III (the “Chapter 7 Trustee”) on October 25, 2010 (the “Trustee’s
Motions”) and the Objection to Trustee’s Final Report and Applications for Compensation and
Deadline to Object (NFR) and Objecting to the Proofs of Claims of Recovery Management
Systems Corporation; FIA Card Services, NA/Bank of America; First Flight Credit Union; and
PYOD, LLC filed by Kevin Scott Hines and Deborah Corbett Hines (the “Debtors”) on
SO ORDERED.
SIGNED this 10 day of February, 2011.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 1 of 9

November 18, 2010 (the “Objection”). The Court conducted a hearing on December 16, 2010
to consider the Trustee’s Motions and the Objection filed by the Debtors.1
Pursuant to the Objection, the Debtors do not object to the request by the Chapter 7
Trustee for compensation for his services, for his accountant, or for his attorneys’ fees as outlined
in his final report.2 However, the Debtors assert that the Chapter 7 Trustee had a duty to object
to proofs of claim for the estate when necessary or to abandon such objections. The Debtors
assert that, although the Chapter 7 Trustee objected to the claim of Suntrust Mortgage, Inc., he
failed to object to the claims of Recovery Management Systems Corporation; American
InfoSource LP as agent for FIA Card Services, NA/Bank of America; First Flight Credit Union;
and Resurgent Capital Services.
A proof of claim was filed by Capital Recovery III LLC, as assignee of Capital One
Installment - Recovery Management Systems Corporation for Capital Recovery III LLC on
January 18, 2010 in the amount of $17,229.50 based on amounts spent on a revolving credit line.
Attached to the proof of claim is an Account Summary showing the last four digits of an account
number as 2031 and providing that the underlying account information was generated from the
account databases of Capital Recovery III LLC/Capital One Installment and their agents, if any.
1The Debtor failed to provide each claimant the thirty (30) days notice of the objection to
claim as required by Fed. R. Bankr. Pro. 3007(a). The Objection was served on November 18,
2010 and the hearing was held on December 16, 2010.
2The Trustee requested a commission of $5,041.77 and expenses in the amount of $15.47
based on a proposed distribution of $44,417.66. It seems odd that the Debtors have no objection
to the commission based on a distribution to unsecured creditors when the Debtors argue that the
claims should not be allowed by this Court. If the objections were successful, the Debtors would
receive the balance of the proceeds held by the Chapter 7 Trustee and the Chapter 7 Trustee
would not be entitled to a commission. See 11 U.S.C. § 326(a)(setting forth the statutory
guidelines to calculate chapter 7 and 11 trustee commissions).
2
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 2 of 9

Capital One was listed as a joint debt on Schedule F filed by the Debtors in the amount of
$17,353.08. The full account number was listed on Schedule F and provides that the last four
digits were 2031.
A proof of claim was filed by American InfoSource LP as agent for FIA Card Services,
NA/Bank of America on January 7, 2010 in the amount of $17,384.98 based on credit card
charges incurred by the Debtors. Attached to the proof of claim is a Statement of Accounts
setting forth that FIA Card Services, N.A., as successor in interest to Bank of America, N.A.
(USA) and MBNA America Bank, N.A. by American InfoSource LP as its agent is a creditor of
the Debtors in relation to the account number ending in 7354. FIA Card Services was listed on
Schedule F filed by the Debtors as a credit card debt with an amount due of $17,384.98.
A proof of claim was filed by First Flight Credit Union on October 28, 2009 in the
amount of $3,690.93. Attached to the proof of claim form is a copy of the Credit Line Account -
Advance Request and Security Agreement Application executed by Kevin S. Hines on June 13,
2006. Pursuant to the application, First Flight Federal Credit Union loaned $3,800.00 to the male
debtor with an annual interest rate of 10.75%. The Debtors listed on Schedule F a personal loan
from First Flight Federal Credit Union due in the amount of $3,961.86.
A proof of claim was filed by PYOD LLC as a successor and assigns as assignee of
Citibank, c/o Resurgent Capital Services (“Resurgent”) on October 27, 2009 in the amount of
$27,055.44. Attached to the proof of claim was a copy of an account detail identifying the last
four numbers of the original account number as being 1036 and held by Kevin Hines. 	In
addition, Resurgent attached a copy of the Assignment and Assumption Agreement executed by
Citibank (South Dakota), National Association identifying that PYOD LLC was the subsequent
3
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 3 of 9

buyer of this claim. Citibank was listed on Schedule F filed by the Debtors as a debt of Kevin
Hines for credit card charges in the amount of $26,397.50.
On August 27, 2009, the Court docketed the Notice of Chapter 7 Bankruptcy Case,
Meeting of Creditors, & Deadlines which set a deadline of January 22, 2010 for creditors to file
proofs of claim and February 23, 2010 as the last date for the government to file proofs of claim.
Therefore, each of these four claims was timely filed.
Section 502(a) of the Bankruptcy Code provides that a proof of claim which is filed
pursuant to 11 U.S.C. § 501 is deemed allowed, unless a party in interest objects. Federal Rule
of Bankruptcy Procedure 3001(a) requires that a proof of claim be a written statement and that
it substantially conform to the Official Form. Rule 3001(c) provides that:
[w]hen a claim, or an interest in property of the debtor securing
the claim, is based on a writing, the original or a duplicate shall be
filed with the proof of claim. 	If the writing has been lost or
destroyed, a statement of the circumstances of the loss or
destruction shall be filed with the claim.
The Debtors argued that the original documents evidencing each claim were required to
be attached. 	The Court disagrees. See In re Forrest, Case No. 06-01967-8-RDD (Bankr.
E.D.N.C. May 22, 2009)(Leonard, J.). Furthermore, the Debtors argue that the proofs of claim
fail to satisfy the requirements of Federal Rule of Bankruptcy Procedure 3001.
Writings evidencing each claim were attached to the proofs of claim filed by each of the
creditors. 	The Court recognizes that none of the summaries attached to the proofs of claim
included itemizations or a detailed breakdown of the account. Furthermore, the agreements do
not evidence the existence of an agreement between the Debtors and the creditor that would
obligate the Debtors to pay certain charges or interest.
4
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 4 of 9

The United States Bankruptcy Court for the Northern District of Georgia had the
opportunity to consider the validity of proofs of claim filed by creditors with similar attachments.
In re Shank, 315 B.R. 799 (Bankr. N.D. Ga. 2004). In Shank, the court stated that whatever the
minimum requirements were for Rule 3001 with respect to providing attachments, it recognized
that the proofs of claim subject to the objections filed by the debtor failed to meet them. 315 B.R.
at 810. Had the creditors included the proper attachments and complied with Rule 3001, they
would have been entitled to have their claims be considered as prima facie allowable claims that
were presumptively valid. Id. However, for whatever reason, these creditors failed to comply.
Id.
Just because the claims are not presumptively valid, does not mean they should be
automatically disallowed. The court went on to consider the effect a deficient filing has on the
claim stating that:
[t]he 	consequence 	for 	such 	a 	deficiency, 	however, 	is 	not
disallowance of the claim but denial of the Rule 3001(f)
presumption of validity with, if appropriate, leave to the creditor
to amend the claim.
Id. emphasis in original.
The debtor in the Shank case sought disallowance of the claims based solely on the lack
of documentation or “pleading deficiency.” Id. at 811. Ms. Shank failed to provide that:
...she has any good faith theory that might require disallowance or
reduction of any of the claims, on most of which, as matters now
stand, she admits some liability in her schedules, she insists that
the procedures of the bankruptcy rules governing disputes require
that currently undisputed claims be disallowed. (The [c]ourt uses
the term “undisputed” in the sense that no objection on the merits
has been filed to any claim.)...Such a result not only makes no
sense; it threatens the fair treatment of creditors in bankruptcy
5
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 5 of 9

cases (especially chapter 13 cases), the just administration of those
cases, and, indeed, the integrity of the bankruptcy system...
At a minimum, the bankruptcy rules must be interpreted as
requiring that a challenge to a proof of claim assert a basis for its
disallowance or reduction under 11 U.S.C. § 502(b) – the
existence of at least a potential dispute – before the procedures
governing the determination of disputes in the claims allowance
process are even invoked. 	This conclusion follows in the first
instance from the application of 11 U.S.C. § 501, which permits
the filing of a proof of claim, 11 U.S.C. § 502(a), which provides
that a filed proof of claim is deemed allowed unless there is an
objection, and 11 U.S.C. § 502(b), which specifies the grounds on
which a claim is to be disallowed. 	None of these provisions
require the attachment of documentation to a proof of claim or
disallowance in its absence.
Id. at 811-12. emphasis in original.
The Shank court went on to say that “it is not fair to a creditor to sustain an objection to
its proof of claim based on inadequate documentation unless the objecting party alleges some
basis for objecting on the grounds that would allow for disallowance or reduction under §
502(b).” Id. at 812. The claims allowance process, including the rules and the shifting of burdens
associated therewith, “provide a fair and inexpensive procedure for the proper determination of
claims on the merits.” Id. at 814. 	This process should not be used unless there is an actual or
potential dispute regarding liability for the debt or the amount. Id. The Shank court went as far
as to say “Rule 9011 precludes invocation of the [c]ourt’s process to require a creditor to provide
documentary support for a claim in the absence of a good faith basis for inquiry into the claim
or a dispute about its validity or amount.” Id. at 815.
The Shank court looked to specificity - should a debtor think that a claim is overstated,
includes illegal or improper charges, or for any other reason the debtor believes he or she may
6
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 6 of 9

not have liability, after investigation, the debtor can raise any defense or claim he or she believes
is applicable. Id. In order to complete a “good faith inquiry into the existence or amount of any
liability and a claimant refuses a legitimate request to produce it, an objection that asserts [a]
good faith challenge and requests disallowance of the claim due to inadequate documentation
would be appropriate...” 3 Id. Based on its rationale, the Shank court concluded that an objection
to claim, without having been raised in connection with the merits of the claim or based on the
need for documentation to conduct a good faith inquiry, will not be denied as “the claim should
not be disallowed merely because documentation is not attached.” Id. at 816.
This Court concurs with the Shank court based on the facts presented in this case. The
Debtors filed a petition for relief under Chapter 7 on August 27, 2009 and disclosed each of these
debts on their schedules and did not identify any of the claims as disputed.
The proofs of claim were filed between October 27, 2009 and January 28, 2010. The
proofs of claims were filed in an amount substantially similar to the amount listed by the Debtors
on their Schedules. Furthermore, the account numbers, where provided and to the extent
disclosed in accordance with Rule 9037, were identical.
On May 18, 2010, the Chapter 7 Trustee objected to claim no. 3 filed by Suntrust
Mortgage, which objection was sustained. The Chapter 7 Trustee also stated that he did not
object to the four claims which are the subject of this hearing, because there was no good faith
basis on which to object. It was not until after the Chapter 7 Trustee filed his Notice of Trustee’s
3The Shank court cautioned creditors not to withhold information or documentation about
the claims when a party has a basis for requesting it. Id. at 816. It notes that if the creditor fails to
provide appropriate documentation when requested from it, an objection stating such would be
appropriate. Id.
7
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 7 of 9

Final Report on October 25, 2010 and disclosed that he intended to distribute the proceeds from
the life insurance4 to pay unsecured creditors did the Debtors determine that they should object
to each of the four remaining unsecured claims. 	The Debtors had ample time to review and
object to the claims prior to the filing of the final report. 	In the Court’s view, there appears to
be a self-serving purpose for the Debtors. Had the Debtors filed their objections and had the
objections been sustained, since no other claims were allowed, the Debtors would have been
entitled to a refund of all of the proceeds, thereby eliminating any distribution to unsecured
creditors. Counsel for the Debtors admitted that the lack of documentation on each claim was
the sole basis for the objections. Furthermore, counsel for the Debtors did not deny that the
Debtors owed the amounts stated in each claim.
Therefore, based on the disclosure of these debts in the Schedules filed by the Debtors,
the filing of the claims in substantially the same amounts with the same account numbers, and
the Debtors failure to raise any substantive grounds for their objections, the Court OVERRULES
the Debtors’ objections to the claims of Capital Recovery III LLC, American InfoSource LP,
First Flight Credit Union, and PYOD LLC. These claims are ALLOWED as filed.
In addition, the Court hereby APPROVES the Chapter 7 Trustee’s Final Report, Form
IV - Trustee’s Request for Commission and Reimbursement of Expenses, APPROVES the
4Section 541(a)(5)(C) provides that the life insurance proceeds payable to a debtor as a
beneficiary under a life insurance policy are property of the estate.
8
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 8 of 9

Application for Compensation of Attorney for Trustee and Reimbursement of Expenses, and
APPROVES the Motion for Compensation of Accountant.
SO ORDERED.
END OF DOCUMENT
9
Case 09-07264-8-RDD Doc 69 Filed 02/10/11 Entered 02/10/11 15:04:01 Page 9 of 9