Bankruptcy Lawyer Bryan W. Stone answers the question: “Should I file bankruptcy?”
If you’re considering filing for bankruptcy you have likely come to understand just how many technicalities and rules are part of the process. The system can often appear as if it were designed to be purposely complicated to dissuade people from filing in the first place. One aspect of the process you may not be familiar with is the “proof of claim” filed by creditors. To find out more about what a proof of claim is, keep reading.
A proof of claim is a document that a creditor prepares and files with the bankruptcy court to make clear that they want to be paid. Technically, the proof of claim is a request that the creditor be granted some kind of distribution from the bankruptcy estate.
Does everyone file a proof of claim?
Not all creditors are treated equally in the bankruptcy process. Secured creditors are given higher priority over unsecured creditors, something that can also impact who is required to file a proof of claim. In Chapter 7 and Chapter 13 bankruptcy cases, all unsecured creditors are required to file a proof of claim if they ever want to be repaid any of the money they are owed. The same is not always true for secured creditors who are able to preserve their claims even without filing the proof of claim.
When is a proof of claim not required?
In some cases the bankruptcy court may tell creditors not to bother filing a proof of claim. This only happens in relatively limited circumstances, such as when the debtor is filing a Chapter 7 liquidation bankruptcy and there are no assets to be sold. Without assets, there will be no money to distribute to creditors, so a proof of claim would be of little value.
When is a proof of claim filed?
Creditors aren’t given an unlimited time to file their proof of claim. Instead, bankruptcy rules say that any non-governmental creditors must file a proof of claim within 90 days after the initial meeting of creditors. Perhaps unsurprisingly, governmental creditors (meaning the IRS or child support services) are allowed to wait even longer. Creditors are given plenty of warning about this deadline, with the date appearing in the first notice sent to creditors informing them of the bankruptcy. Given the advanced warning, it is uncommon for extensions to be granted, though courts have the power to do so if they choose.
What if there’s a mistake in the proof of claim?
Creditors must include a bunch of specific details in their proof of claim, including the amount of the debt, interest and penalties. Occasionally, these details are wrong and it falls to the debtor or the bankruptcy trustee to object. Generally, the person objecting will be the bankruptcy trustee as it’s their job to ensure debts are properly accounted for and paid out, but if the trustee has overlooked the mistake the debtor can attempt to file his or her own objection.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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