Bankruptcy allows creditors to assert claims against a debtor while allowing the debtor an opportunity to reorganize. A proof of claim filed correctly is hardly considered a noteworthy event. Often, this simply requires a short time to complete the form. A proof of claim filed incorrectly may have substantial negative consequences.
The Federal Rules of Bankruptcy Procedure (FRBP) in tandem with local rules and forms govern the filing of proofs of claim in bankruptcy cases. There is a deadline for filing proofs of claim. Creditors must file a proof of claim before the applicable deadline or bar date. This deadline is 70 days after the petition filing date. Government entities must file a proof of claim within 180 days after the date of the order for relief – the date that the bankruptcy filing occurred.
A proof of claim is a sworn statement representing that all the information included is true to the best of the signatory’s knowledge. The standard proof of claim form notes that the signatory is making representations under penalty of perjury.
Creditors with claims listed on the debtor’s schedules may not be required to file a proof of claim if the scheduled claim is not disputed, contingent, or unliquidated. Most creditors rarely rely on this fact and, instead, file proofs of claim to ensure that they are optimally protected. The debtor may amend its schedules to modify or even remove a scheduled claim, which the creditor may fail to note. Thus, rarely, does a creditor fail to file a proof of claim.
The act of filing a proof of claim constitutes a party’s consent to the jurisdiction of the bankruptcy court to adjudicate both matters pertaining to the claim itself and any related matters, including claims by the debtor against the creditor.
An early-filed proof of claim may help a creditor stake out a position in the case, especially when a creditor wants to become involved in the bankruptcy case because of its status as a major creditor. Filing a proof of claim early also gives other creditors notice of the claim, which may help the creditor to collect on the claim immediately in exchange for any distributions to be made later.
The proof of claim informs the bankruptcy court and trustee about the basis, type of claim, and the amount owed on the claim. This allows the trustee to determine the amount to which the creditor is entitled if anything. All creditors who wish to receive any distribution of funds must file a proof of claim under FRBP 3002. Any secured, unsecured, or equity secured creditor, with some exceptions, must file a proof of claim to receive money from the bankruptcy estate. However, even if a secured creditor fails to file a proof of claim, it will not forfeit its lien.
If funds are unavailable for distribution in Chapter 7 “no-asset” cases, filing a proof of claim may seem like a waste of time. However, most creditors, especially car lenders, credit card companies, banks, and mortgage lenders, file proofs of claim regardless of the expected outcomes.
if a secured lender fails to file a proof of claim in a Chapter 13 case, thus forfeiting the chance to receive monthly plan payments, a debtor who wishes to retain the property securing the claim can make the payments directly to the creditor instead of through the plan. Also, the debtor may file a proof of claim on behalf of the creditor.
Debtors may object to a proof of claim if the amount is incorrect, the claim includes improper interest or other penalty charges, the claim incorrectly indicates that it is a priority or secured claim, the creditor filed the claim to harass the debtor, or the creditor did not attach supporting documentation.
The Morrison Law Group has remained open throughout the pandemic to serve the residents of the state of Utah. We have maintained our professional commitment to past, present, and future clients. In the summer of 2021, bankruptcy remains a sensible and effective option for any Utah resident to obtain a financial fresh start. To discuss and determine your options for filing bankruptcy, contact the experienced attorneys at the Morrison Law Group. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, Orem, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.