irises secured claim in the chapter thirteen bankruptcy of mr and mrs austin the debtors and the amount of the ira secured claim hinges on the valuation of an asset reported in their schedules that a unresolved worker's compensation claim at the time they filed their schedules they listed this unresolved claim at zero dollars and continued to assert the claim had no value a nuisance value or at the very end a nuisance value of three thousand dollars despite settling the worker's compensation claim for twenty three over twenty thousand dollars seven months after they filed their bankruptcy protection now the i r s claim as a matter of law is entitled to a presumption of correctness the federals of bankruptcy procedure accorded that deference it is the debtor that must come forward first with  substantial evidence to rebut that presumption the bankruptcy court order i was in error because the court incorrectly found that the debtors presented substantial evidence in support of their objection a claim in the form of a single uncorroborated here's a affidavit of their workers compensation attorney regarding the value of well let's start with that statement of error how do we review that what's our standard of review because in the briefing i saw two different citations one that says it's a clearly erroneous standard and one that says it's do you know what you think it is well your honor it's the united states position that the panel's decision should be the same regardless of the finale interview analysis however our primary position is that this is a question of law the eighth circuit in the case blodgett has found that it is a question of law whether there was sufficient evidence present to shift the burden of proof however were this court to determine that this is a question of law we believe that the bankruptcy courts are a factor to me yes thank you if this was a question of fact that in providing weight let alone any weight to the hearsay affidavit of the workers compensation attorney that that was a clear error in relying on that fact so did you there was a hearing on the objection a claim and during that hearing both parties presented their legal arguments there was discussion of the affidavit however mr austin's attorney did not seek to have that affidavit admitted into evidence the mr small with the attorney the if i and was not present to provide testimony he was not cross examined in fact no witnesses were cross examined the counsel for the i r s request the opportunity to cross  i'm not aware that that's not on the record however in the very first initial objection a claim hearing in this case where in that hearing the court ruled that the workers compensation claim needed to have a value and the austins needed to provide a value for that claim the court said that it may require an evidentiary hearing more testimony would be offered or an x the even an expert  value of the claim it's our position that there was no evidentiary hearing in this case and that is why our argument here today in the alternative should this court wish to remain the case  substantial evidence yes but there was no formal offer of the affidavit at the hearing but the judge clearly relied upon it because she cited to it  want to put aside the hearsay issue it is still an affidavit that is conclusory and that is the statement of the worker's compensation attorney where he is opining that the claim has a certain value however it's uncorroborated there's no additional documentation or additional fact other than i continue to work the case and therefore i settled it for more did the i r s put in any evidence to to establish otherwise to establish the value otherwise  the united states claim the ira's claim is based on two pieces of information one it is the admissions of the office and themselves the amount of equity that they reported in their own schedules and the second value included is the amount actually received by the austins in the settlement when the irish learned that there had been a settlement and it was approved by a judge for the missouri department of labor in industrial relations the united states included that value the settlement was approved by and received by the austin in july prior to the initial hearing or prior to the initial hearing excuse me so a claim involving an asset of the bankruptcy state was settled without the approval of the bankruptcy court that's correct and again the court ordered initially that this claim must have a value that was the initial on the initial objection a claim and they did not revise their schedules at that point and that was why the united states revised its amount of its secure claim because it came to know more information about the actual value received and again the united states position is not that there should be a standard rule that an amount received is the correct value for a claim our position is that the claim cannot not have a value and that the austins affidavit alone is not sufficient the presumption of correctness of the ira's claim which again was based on publicly available information approved by a state court and the austins own disclose courts in the eighth circuit in particular and ray brown have examined what is substantial evidence in the context of an objection a claim i have found there is no substantial evidence when debtors presented uncorroborated testimony law had great weight in addition to that that the pieces of information used to reach the claim value are also are greater in force probatively than the uncorroborated conclus hearing with the position that the affidavit was not substantial evidence and no burden had been shifted i think what that there are times where as you can tell in the case law  that most of the time the bigger city courts have ruled on this issue there was an evidentiary hearing where parties on both sides presented evidence about the regarding a claim in rebutting that presumption and it's our position that that that did not happen here isn't isn't it the isn't it the law that the burden of proving the tax issue is always on the debtor in terms of of  so in some circumstances of objection a claim the debtor is coming forward and has the burden of proving that he putting forward evidence that that tax is not owed however in this case it's a narrower issue and that is another creditor to present evidence additional evidence to support it and what happened here is that we believe the bankruptcy court made a proceeded to make a valuation determination when that initial  burden had never been shifted based on the evidence presented by the austin thank you i understand your reserving some time yes i think that further i didn't believe that further admission was required doesn't doesn't the fact that he was trying was not present at the i r s didn't have an opportunity for cross examination or to fully develop the facts with regard to what the value was at the time of the bankruptcy filing well i'm not sure but are you asking me if it prejudice to the appellant to do that i mean i i there was a good year between the final objecting in some way to the admission to the admission or to the use of the document at the court bases for its ruling well i want you tell us this i mean isn't this case about whether or not that affidavit relied upon by the bankruptcy judge constitutes substantial evidence i mean doesn't that the issue that's in front of us yeah i think i think the court essentially was required to do something couched within rule three thousand one and use the case law that sort of analyzed what the burden the shifting burden of proof between the parties in regards to you know showing certain issues in the claim ok so the affidavit essentially says that when i filed the case it was a nuisance then that because i continued pursuing this nuisance it grew in value over time and to the point that i was able to reach a settlement but the iraqis say what we're trying to value is the secured claim of the i r s that the secured claim of the i r s is one hundred percent of the debtors property right at the data bankruptcy filing letters property right in this past that was the injury had already occurred is a clear that is correct so the injury didn't increase from the data bankruptcy filing to the date that was seven months later when it was settled that well it depends on who you ask i mean off i thought we were going to take an liquidated personal injury or worker's comp cases of the debtor at the time of filing and apply some sort i don't know formulaic valuation formula i think it really diminishes the value of the whole area of practice of law whether it be personal injury cases or worker's comp cases i don't think the necessity of those attorneys would exist injury of mr austin so mr austin had a knee injury on the day of bankruptcy filing he still had that seven months later when he settled the case it was only seven months six seven months writing to him data filing and date of settlement house how did whatever mr austin did i'm sorry mr small mr small how did that have anything to do with the value of the x basically the extent of the injury  can find that answer in the face of the affidavit and i think mr smallwood says look at the time of the debtor file bankruptcy the employer had not accepted liability there had been no demand there have been no settlement demands major settlement offers discussed but he was still injured correct but what if the debtor if the debtor doesn't have a worker's comp attorney i don't believe that i don't believe that at any point he gets anywhere near what the case what the claim of eventually settles for and i don't i'm hesitant to go too far down that road because we have to value i mean i think the code says explicitly that it has to be valued as the day of the filing of the case i think it's analogous to a personal injury claim if it's abandoned by the debtor at the time of the filing of the case i mean that the value of this knee injury claim somehow grew how did the the value of the claim for an injured knee grow over a seven month period well i don't think i don't think that that was that's the evidentiary burden but i think i can answer the question i think it's it's the work of the claimants attorney i mean one the debtor arrest to continue treating he has to get a rating you have but the attorney is compensated for his work that doesn't have anything to do with how much the claim was value  mean what i believe it does because if you if you take a claim i mean my firm does substantial amount of defense work i mean we're not i would and i can't speak for other attorneys in my office but you don't generally get to the petition a pre partition demand and say and tell your client expect to pay this amount and settlement of the claim i mean there was a lot of work and in this case post petition work that was required to eventually reach the post amount and i and again i don't i don't think that that's going on in your argument is if he didn't have an attorney the claim would have been worth zero yeah that was the original our original argument was that because at the time of the filing of the case there had been no offers to settle the case and the court disagreed with us they said if you're going to continue to prosecute the case it must be worth something well let me ask you a different practical question let's just let's set aside the value of the claim for the time  know let's say it's three thousand dollars or it's twenty one thousand or whatever the amount is if the i r s has not paid those fines as a secured credit or what happens to them in the bankruptcy but well in this instance because of missouri's worker's compensation exemptions there it's really sort of a no harm i don't want to call it that but there was no effect to the bankruptcy case you know there amended the schedules i did not i have not yet i mean the discussions of been have been  schedules have been and still are as to this claim they show the value as unknown of the claim but what i'm saying and i think this is i understand where the court is going with this is it doesn't affect like there's not a best interest of creditors interest in those exemptions as i understand there are secured liens so doesn't it become disposable income if it doesn't go to the i r s and we buy your argument then doesn't it get distributed to other creditors are subject to other or motions or their orders of the corps which i and i heard the courts question and i don't recall that we didn't follow a motion to retain those proceeds so but i can't speak to that i just didn't look at that in the record before in preparing for today's hearing but i mean yes i suppose you could make the make practice in the district in which this court this this decision came from was that debtors will routinely request to retain all or portions of those funds to do either things that are to increase the planned i mean sometimes  case the opinion that was written by judge posner i think it's the polish case so that it's not a sort of misuse of the bankruptcy code or the bankruptcy law that the debtors claims could increase in value post petition so i think that you know to get back to the original question i don't think i think that you know it's the best value was the value of the following  the injury doesn't change and seven months later you have a settlement amount does that in your to the benefit of the credit to the debtor or does it in new or to the benefit of the secured creditor to the extent they're never paid  still go back to how is that substantial evidence of the value when you have that actual settlement value just a few months later well again i think it goes back to the  amounts of post petition work that was necessary to enhance the value of the client but but post petition in a chapter thirteen the estate continues to exist it's not like a chapter seven where it gets cut off and and things then continue i mean as that  value increases as judge sandberg says why is three thousand dollars better than the settlement amount because the valuation is required under five o six to be to happen and be assessed as of the day of the filing of the case i don't think there's any way around that so so where's the evidence though i'm trying to find the substantial evidence that the value of this claim was three thousand dollars attorney who has no no interest in the valuation of the claim for the purposes of the debtor here saying look i've done thousands of these cases in this jurisdiction and here are the facts of this case at the time that the petition was filed and so my best assessment based on the thousands of cases that i filed was this i mean i i said it doesn't describe the injury it doesn't describe i disagree i think there is some description of the injury i mean i you know i yes i don't know i'm sorry i just don't and i can't think of a defense attorney who would offer more honestly at the point i mean i'd say that the standard of practice is to make a plaintiff go through the discovery process in his work comp claim really the thing that needs to be proven is that the injury occurred at work and then there's a schedule based on the injury it's not something that develops through avodah if there is somewhat of that i won't dispute that there is there's the quote unquote meet chart and i don't know a lot about it but i know it is based on a lot it's not based merely on the employer accepting that the it happened in the course and scope of the day of the dump of the claimants employment and that this is the amount that's claimed it's a there is a basis of medical you're little over three and a happens as an initial matter as argued in our briefs the united states did preserve its objection in the objection a claim hearing again it was only a nine minute hearing it was very brief but the united states specifically stated that its position was this affidavit did not constitute substantial evidence and in turn the united states does not argue and actually agrees that the standard is the value of the claim on the date of the petition however the argument determination is it's as if i said my car has no value today even though i do because i want to sell it but i've done nothing to try and sell my car and yes assets can appreciate over time but on the date appropriately valued on that position date that appreciates over time and that appreciation is not included in included in the bankruptcy plan however here the there the bankruptcy court highlighted the case that discussed that while litigation claims might be very difficult to value that something that a bankruptcy court is capable of doing and that debtors might again need to provide expert evidence gather evidence of similar monetary settlements and unlike some cases where that might be very difficult in the worker's compensation field there is a statutory schedule about and publicly available settlements about what potentially similar injuries may have settled for if mr bruce put if put if the workers compensation attorneys have been put forward he could have explained his reasoning about why his expertise perhaps resulted in taking a bad claim to twenty thousand dollars however that was not put before the court and no additional corroborating information was provided in addition this ruling of the bankruptcy court create incentives that are contrary to the goals of chapter thirteen which is to insure the distribution of assets to creditors the bankruptcy courts ruling encourages debtors with unwitting gated unresolved claims to put off evaluating those claims until after they file a petition and supporting supporting a lowball value based on the fact that no work had been done up until that point it is therefore the united states respectfully request that the bankruptcy court ruling that the uncorroborated hearsay affidavit was substantial evidence be overruled however in the alternative the united states requests to remain and for an evidentiary hearing