Most bankruptcy cases, whether they are Chapter 7 or Chapter 13, will require creditors to file a proof of claim if they want to recover payment. This proof of claim is a document that lets the bankruptcy court, debtor, and trustee know that a creditor wants to get the payment they are owed from the bankruptcy estate. Sometimes, the person filing for bankruptcy should file this alert on behalf of a creditor, at other times, they will need to protest this proof of claim. Keep reading to learn more about how a proof of claim could figure into a bankruptcy case.
Which Creditors Have to File a Proof of Claim?
Now not every creditor has to file a proof of claim. In either Chapter 7 or 13 proceedings, creditors to whom you owe unsecured debt have to file a proof of claim. Unsecured debts are things such as student loans, credit card debt, medical bills, etc. Secured debt, on the other hand, are debts like your mortgage or your car loan, where if you fall into debt, the creditor can take the collateral that was backing up the debt. For example, your mortgage is secured by your house; if you go into debt, your lender could take the house. Secured creditors do not need to file proof of claims.
When and How a Proof of Claim Is Filed
Every creditor that is not the government has 90 days after the first meeting of creditors within which they have to submit their proof of claim. Government creditors have a 180-day deadline to meet. For the most part, there is an Official Bankruptcy Form that must be filled out, which will give information about the creditor as well as the debtor, and outline the debt that is owed. Supporting documents must be submitted with this form. There can be an unofficial proof of claim as well, however. A bankruptcy judge has to decide if any informal claims will make the cut.
There will be no proof of claims in a Chapter 7 bankruptcy where there are no assets, however. The court can tell creditors that there will be no bankruptcy estate with which to pay them off. So there is no point in filing a proof of claim. If money or property does enter the bankruptcy estate at a later time, however, then creditors could file this proof of claim in order to recover a portion of the debt.
How to Object to a Proof of Claim
Depending on the circumstances, a debtor, a trustee, and anyone else involved in the case can object to the proof of claim. They can object to the amount of debt that is stated, the interest or fines given, or the claim of being a priority or secured debt. Objections could also be over the lack of supporting documents or claims that a debtor is being harassed by the creditor's proof of claim. Whoever wants to object has to submit this objection in writing, and they also have to give a copy and notice of hearing to the creditor. They have to do this at least 30 days in advance of the scheduled hearing.
In a Chapter 7 bankruptcy case, only a "party in interest" can submit an objection. Most of the time, this means that only the trustee can object. A debtor can only object in these cases if some money will remain after the process is complete, the trustee neglected to object to a claim, or that the debt is not eligible for discharge. The burden of proof will be on whoever is objecting. As for Chapter 13 bankruptcy, the debtor will usually be able to object.
Cases Where a Debtor Should File a Proof of Claim for a Creditor
As crazy as it might sound, there are cases where you might want to file a proof of claim for a debt you owe in your own bankruptcy case. This could be the case when you have non-dischargeable debt, for example. If a creditor does not file a proof of claim for this type of debt, it will remain outstanding after your bankruptcy is over. If you file the proof of claim, then this debt might be repaid through your bankruptcy, relieving you of that debt. There are even times when you may want to file a proof of claim for secured debt, in order to save your home or car, for example.
To find out if this would be a good idea in your case, and to get the legal counsel you need to successfully navigate the bankruptcy process, contact one of the qualified bankruptcy lawyers on our directory today!