Bankruptcy Lawyer Bryan W. Stone answers the question: “What is Chapter 13 bankruptcy?”
Most people choose to file bankruptcy because they need to lessen their debt burden. A Chapter 13 bankruptcy is one good way of doing that, with the court overseeing an agreement between the debtor and creditors on a repayment plan. The creditors agree to cooperate because it is better to get something in a repayment plan than nothing should the filer instead pursue a Chapter 7 bankruptcy. Debtors like Chapter 13s because they can restructure their debts and hopefully pay less over the course of the plan than what’s owed.
In some cases where creditors wait too long to file what’s known as a “proof of claim”, Chapter 13s can be even more advantageous to debtors. To find out more about Chapter 13 bankruptcies and why creditors need to act fast to ensure their claim isn’t waived, keep reading.
How does the Chapter 13 process work with respect to creditors?
In a typical Chapter 13 bankruptcy, once a case has been filed, the clerk of the bankruptcy court will send out a notice to all the creditors listed on the debtor’s petition for bankruptcy. Creditors are then given a deadline to file what’s known as a “proof of claim”. A proof of claim simply lists what the debtor owes the creditor and supports those numbers with any related documentation.
How long do creditors have to file a proof of claim?
The deadline for filing a proof of claim in a Chapter 13 (or Chapter 7) bankruptcy case is 90 days from the date of the first meeting of the creditors. Technically this deadline only applies to non-governmental creditors, governmental agencies are allowed to wait longer. This deadline is typically included in the first notice sent around to creditors, giving everyone ample time to consider their options.
What happens if the creditor fails to act in time?
If a creditor fails to file a claim within the allotted time, then their debt can be eliminated once the Chapter 13 filer completes his or her repayment plan. A recent case out of the Sixth Circuit Bankruptcy Appellate Panel grappled with this exact issue. In the In re Trench case the court said that creditors are given ample warning to assert their claims and, as such, are expected to do so in a timely manner. The Court decided that waiting eight days after the normal claims bar date was unacceptable, even in cases of excusable neglect. The Court said that “excusable neglect” was not a valid grounds for an untimely filing and that, as a result, the claim (and the corresponding debt) were not included in the repayment plan.
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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