Timing is everything. This is especially true when a creditor seeks to amend a timely filed proof of claim. As a general rule, bankruptcy courts liberally allow amendments to proofs of claim prior to plan confirmation. When considering a pre-confirmation claim amendment, courts focus on whether the proposed amendment relates back to the original claim or if it is an entirely new claim, and whether the amendment is prejudicial to the debtor or creditors. However, if the amended claim is filed after plan confirmation, courts apply a much more stringent standard, illustrating the inherent tension between the Bankruptcy Code’s dual goals of allowing debtors to restructure their debts and safeguarding creditors’ interests and expectations.
The Fifth Circuit recently addressed the standard for allowing a post confirmation proof of claim amendment in CLO HoldCo, Ltd. v. Kirschner (In re Highland Capital Management, L.P.). The decision highlights the significance that courts place on enforcing the finality of confirmed plans and how amendments proposed after plan confirmation are only permitted in truly “compelling circumstances.”
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