Proofs of Claim Proofs of claim and interest are governed by 11 U.S.C. 501 and 502 and the Federal Rules of Bankruptcy Procedure ("FRBP") 3001, 3002, 3003, 3005, 3006, 3007 and 3008. Different rules and requirements are described below based on the different bankruptcy code chapters. The proof of claim is completed using Official Form 410 which is available at the website of the bankruptcy court if a copy is not provided to you as part of the bankruptcy proceedings. Read the Instructions Read the Instructions: In filling out Official Form 410 pay careful attention to the attached instructions and definitions. Additionally, carefully review the cited bankruptcy code sections in order to correctly fill out the form. Specifically, the portion of the form governing priority claims only provides five (5) of the most common priority claims under 507(a) and is not an exclusive list of priority claims. File in the Proper Case The proof of claim must be filed against the proper debtor. If this is in doubt, it may require that the proof of claim be filed against multiple debtors. This is commonly done in cases with several related debtors filing in one jointly administered case. Reservation of Rights It is good practice to expressly reserve the right to amend and supplement the proof of claim. Also, reserve your client's the right to setoff. This protects your client if the debtor later asserts a claim against them. Documentation It is recommended that copies of all necessary documentation underlying the claim should be attached to Official Form 410 and redacted as needed. Originals of documents should not be provided as these may be destroyed after the form is scanned. Filing Official Form 410 should be filed with the bankruptcy court or claims agent as directed. In large bankruptcy cases, a claims agent is often employed to process claims. The proof of claim or interest should be filed electronically or mailed to the proper party. In most cases, a fax or email will not be accepted. Deadlines In chapter 7, chapter 12, and chapter 13 In chapter 7, chapter 12, and chapter 13, a proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meeting of creditors called under ? 341. A proof of claim filed by a governmental unit, with an exception described in ? 1308, is timely filed if it is filed not later than 180 days after the date of the order for relief. These deadlines are described in the Notice sent out by the court upon the initiation of the case or in the Notice sent out upon the determination that there are assets to be administered in chapter 7. Deadlines In chapter 9 and chapter 11 In cases under chapter 9 and chapter 11, a proof of claim must be filed by the time set by the court pursuant to FRBP 3003(c). The court sets this time automatically per its local rules or upon a debtor's motion or the motion of another party in interest. Once a bar date is set, a Notice is sent to all creditors and parties in interest of the deadline to file a proof of claim. Conclusion With the exceptions noted above, filing a proof of claim is necessary to protect your client's right to participate in the bankruptcy claims process. Additionally, the filing a proof of claim causes a creditor to submit itself to the bankruptcy court's jurisdiction and waives its right to a jury trial. In re Ha-Lo Industries, 326 B.R. 116 (Bankr. N.D. Ill. 2005). Finally, one must be vigilant to timely respond to any objections which may be filed in response to the proof of claim.
When you file for bankruptcy, any creditors that think that you owe them money will need to file a proof of claim with the court if they want to be paid out of any assets of the bankruptcy estate. It is very important that you, or your attorney’s office, review all claims filed in a bankruptcy proceeding to make certain that the claims that are being filed are consistent with what you think you owed at the time that you filed for bankruptcy. On the proof of claim form, the creditor is to indicate how much they believe that you owe them, the amount of any arrearages on the obligation, how the court can contact the creditor, and whether the debt is secured, general unsecured, or unsecured priority in nature. The debtor has the right to object to the claim filed by the creditor if they disagree with the amount of the claim. This would require that you offer some evidence of the inaccuracy of the amount claimed. If a proof of claim is untimely filed by the creditor with the court, then any distributions made by the trustee from the bankruptcy estate to creditors will pay all timely file proofs of claim first. Then if there any resources left over or still available after paying the administrative costs and timely filed proofs of claim (which is usually not likely the case), then untimely file proofs of claim can be addressed by the trustee from any remaining resources of the estate.
Chapter 7 Bankruptcy is a liquidation proceeding whereby the United States Trustee appoints a case trustee to assert control over any nonexempt assets of the debtor in order that the assets may be sold and the proceeds used to be distributed out to the debtor’s creditors. Chapter 7 usually takes about 5 to 6 months to complete. The debtor is required to submit a petition to the court, schedules listing all assets and liabilities, income and expenses, as well as the statement of financial affairs and a statement of intentions document. Chapter 7 bankruptcy is the type of bankruptcy that most people think about when they hear the word bankruptcy. This proceeding allows honest debtors to get a fresh start, free from their current desperate financial situation, while at the same time allowing an equitable distribution of available resources to any creditors who file a timely proof of claim.
When a debtor files a bankruptcy action, creditors may or may not have the opportunity to file a proof of claim evidencing the amount owed to the creditor on the date the bankruptcy action was filed. The court sets a deadline for filing the proof of claim, to which all creditors must strictly adhere. But what if a creditor misses the deadline? Is all hope lost, or is there a mechanism to still get the claim in and receive a portion of any distribution? Well, whether an untimely claim is valid or not really turns on notice. - See more at: http://www.jimersoncobb.com/blawg/2013/08/untimely-proofs-of-claim-filed-in-a-bankruptcy-action/#sthash.xbMAlu7u.dpuf
When a chapter 7 petition is filed, the U.S. trustee (or the bankruptcy court in Alabama and North Carolina) appoints an impartial case trustee to administer the case and liquidate the debtor's nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtor's assets are exempt or subject to valid liens, the trustee will normally file a "no asset" report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an "asset" case at the outset, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502(b)(9). In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor's property should consult an attorney for advice. Commencement of a bankruptcy case creates an "estate." The estate technically becomes the temporary legal owner of all the debtor's property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate. The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors. The trustee accomplishes this by selling the debtor's property if it is free and clear of liens (as long as the property is not exempt) or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property. The trustee may also attempt to recover money or property under the trustee's "avoiding powers." The trustee's avoiding powers include the power to: set aside preferential transfers made to creditors within 90 days before the petition; undo security interests and other prepetition transfers of property that were not properly perfected under nonbankruptcy law at the time of the petition; and pursue nonbankruptcy claims such as fraudulent conveyance and bulk transfer remedies available under state law. In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate. 11 U.S.C. § 721. Section 726 of the Bankruptcy Code governs the distribution of the property of the estate. Under § 726, there are six classes of claims; and each class must be paid in full before the next lower class is paid anything. The debtor is only paid if all other classes of claims have been paid in full. Accordingly, the debtor is not particularly interested in the trustee's disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case. The individual debtor's primary concerns in a chapter 7 case are to retain exempt property and to receive a discharge that covers as many debts as possible. Mohammad Faruqui is an attorney in Fort Lauderdale, FL, serving consumer and corporate bankruptcy clients throughout Florida, including the Miami-Dade, Broward and Palm Beach counties. Mr. Faruqui is a member of the National Association of Consumer Bankruptcy Attorneys and a member of the South Florida Bankruptcy Bar Association. Mr. Faruqui has been licensed to practice law in Florida since 2006, and graduated from Nova-Southeastern University Shepard Broad Law Center in 2005. For bankruptcy matters, Mr. Faruqui can be contacted at [email protected] or at (954) 769-0745.
The New Requirement for Proof of Claim If you want to be paid in a Bankruptcy Proceeding, you will need to file a Proof of Claim that conforms to Bankruptcy Rule 3001. This Rule was amended effective December 1, 2011. Not only did the requirements for what must be included in a proof of claim change, but the rule also provides for bad things to happen if you don’t do it right. The new requirements apply in cases where the debtor is an individual, even in a Chapter 11 proceeding. A proof of claim "shall conform substantially to the appropriate Official Form." The official form is available at www.uscourts.gov and the official proof of claim form is form B-10. If the claim is based on a writing, then a copy of the writing (such as the note and deed of trust or certificate of title) must be attached to the proof of claim. If you are claiming amounts other than the principal amount of the debt, like interest or attorney’s fees, then "an itemized statement of the interest, fees, expenses, or other charges shall be filed with the proof of claim." Note that the official form does not have a blank for including this "itemized statement." You will have to attach a separate sheet or put this information at the bottom of the proof of claim. On a secured claim, you must include "a statement of the amount necessary to cure any default as of the date of the petition." You must include the arrears as of the date of the bankruptcy. If your collateral is the debtor’s homestead (principal residence), there are additional required attachments. Also, look out for local rules as they vary. The new rule provides that if you file a claim without the required information set forth above, then the court, after notice and hearing, may preclude you from presenting any evidence as to the information left off (thus preventing you from collecting those amounts), or sanction you by awarding the attorneys’ fees and costs against you, or both. So, you need to be much more careful in filing proofs of claims in light of the new Bankruptcy Rule 3001.
CREDITORS! Why your Proof of Claim is so important A proof of claim is an official document filed by a creditor in a bankruptcy case in order to assert a claim against the assets of the bankruptcy estate. It is essential for a creditor to file a claim in a bankruptcy case if that creditor wants to be paid anything. The claim tells the court how much the creditor is owed and the type of claim being asserted (priority, secured, or unsecured). Chapter 7 In a Chapter 7 case, however, most consumer debtors do not have many proofs of claim filed in their cases. This is because a creditor only gets paid if the Chapter 7 trustee sells property, which rarely occurs. Most Chapter 7 debtors have only assets that are covered by exemptions, and therefore not available to the trustee to sell. Chapter 13 In Chapter 13 filings, it is more common for creditors to file proofs of claim. If the creditor has a secured claim, the creditor must attach additional documentation to show the type of collateral pledged and evidence that the security interest is valid, properly documented, and timely filed with the appropriate agency (otherwise known as the security interest being “perfected"). Additionally, claims filed on secured debts also require the creditor to set forth what they believe the collateral is worth. This is useful information because you typically pay the value of a secured claim plus interest under your Chapter 13 plan. Obviously the value set forth by the creditor in the claim is not definitive, but it at least lets you know what your lender believes it is worth. What happens if a creditor fails to file a claim in your bankruptcy and they are listed on your schedules? Good news for the debtor! Any creditor who fails to file a proof of claim in a Chapter 13 case will not share in any distribution under the plan. If you hold an unsecured claim, this may not be a big deal because unsecured creditors typically are paid very little, if anything, under the plan. However, for most secured creditors, filing a claim is extremely important.
Importance of a Chapter 7 Discharge A Chapter 7 Discharge is the culmination point of measuring success in almost all Chapter 7 cases. A Discharge is the court order approving a person's release from most kinds of debts. Mistakes Often Made When Filing Without a Lawyer Common problems in self-represented debtors' cases include: the failure to file required documents, resulting in dismissal; filing a chapter which may not be correct for the debtor's circumstances; choosing incorrect property exemptions; unnecessarily filing bankruptcy in the first place; not filing the required credit counseling or financial management certificate; being unable to answer or adequately defend an action seeking to deny discharge; and not understanding the significance of certain motions or adversary actions. Self-represented creditors are often harmed by not filing a proof of claim in time, by missing the deadline to file a dischargeability action, and having difficulty filing an objection to a claim. About 39% of Chapter 7 cases Filed Without a Lawyer Will Not Have a Discharge A chapter 7 bankruptcy--generally, the easiest type of bankruptcy available--should result in a discharge of debts. Using this basic measure of success, a self-represented debtor in chapter 7 in the Central District of California will obtain a discharge of debt only approximately 61 percent of the time in this district, compared to the much more favorable 95 percent discharge rate of attorney-represented chapter 7 cases. The odds for success are very poor when filing bankruptcy without a lawyer. Persons who hope to be released from debts and gain a fresh start don't have a very good chance unless they file with a lawyer. The Central District of California is huge, covering Los Angeles, Orange, Riverside, San Bernardino. Ventura, and Santa Barbara counties. Statistical Sources for this Article The statistics in the artice were obtained from a report entitled 2011 Annual Pro Se Report issued by the Uniterd Sates Bankruptcy Court for the Central District of California, available at http://ecf-ciao.cacb.uscourts.gov/Communications/prose/annualreport/2011/sectioniib.htm
You’ve just received an official notice in the mail that says a person who owes your company money has filed bankruptcy. What now? Can you call the individual debtor and demand paymen t of the debt? No. The filing of a bankruptcy petition invokes what is known as the Automatic Stay. The Automatic Stay means that all collection activities against the Debtor must cease, effective immediately. Is the debt gone just like that? No. The Debtor has to comply with court rules, file the appropriate documentation with sufficient disclosure of his financial status, and successfully complete the remainder of the process required for the chapter under which he filed. Most non-business debtors file under Chapter 7 or 13. If the debt is secured, then the Debtor must either reaffirm the debt (effectively removing it from bankruptcy protection) or surrender the collateral. What must I do to get paid? All creditors must file a Proof of Claim with the court to be considered for payment. Proofs of Claim are fairly straight-forward documents where the Creditor states the amount and nature of the debt. Always attach evidence of the debt to the Proof of Claim, and redact all identifying numbers, such as the Debtor’s social security number and date of birth. Secured creditors, for the most part, are protected up to the value of the collateral. If the Debtor has assets available for distribution to unsecured creditors, and you have filed a sufficiently supported Proof of Claim, then as an unsecured creditor you also have a right to recover a share of available assets.
The bankruptcy proof of claim form has been amended in several respects. A new section—3b—is added to allow the reporting of a uniform claim identifier. The new identifier consists of 24 characters and is intended to facilitate automated receipt, distribution, and posting of payments made bymeans of electronic funds transfers by chapter 13 trustees. Creditors are not required to use a uniform claim identifier. Language is added to section 4 to clarify that the annual interest rate that must be reported for a secured claim is the rate applicable at the time the bankruptcy case was filed. Check boxes for indicating whether the interest rate is fixed or variable are also added. Section 7 of the form is revised to clarify that writings (such as a promissory note) supporting a claim or evidencing perfection of a security interest must be attached to the proof of claim. If the documents are not available, the filer must provide an explanation for their absence. The instructions for this section of the form explain that summaries of supporting documents may be attached only in addition to the documents themselves. Section 8—the date and signature box—is revised to include a declaration that is intended to impress upon the filer the duty of care that must be exercised in filing a proof of claim. The individual who completes the form must sign it. By doing so, he or she declares under penalty of perjury that the information provided “is true and correct to the best of my knowledge, information and reasonable belief." That individual must also provide identifying information—name; title; company; and, if not already provided, mailing address, telephone number, and email address—and indicate by checking the appropriate box the basis on which he or she is filing the proof of claim (for example, as creditor or authorized agent for the creditor). Amendments are made to the instructions that reflect the changes made to the form, and stylistic and formatting changes are made to the form and instructions. Spaces are added for providing email addresses in addition to other contact information in order to facilitate communication with the claimant. The provision of this additional information does not affect any requirements for serving or providing official notice to the claimant. A sample form may be found at: New Revised BK form. ATTACHMENT INVOLVING DEBTOR'S PRIMARY RESIDENCE There is also an "Attachment A" to the proof of claim form. It must be completed and attached to a proof of claim secured by a security interest in a debtor’s principal residence. The form requires an itemization of prepetition interest, fees, expenses, and charges included in the claim amount, as well as a statement of the amount necessary to cure any default as of the petition date. If the mortgage installment payments include an escrow deposit, an escrow account statement must also be attached to the proof of claim. The form may be found at: Supplemental form involving debtor's principal residence. ATTACHMENT INVOLVING CHAPTER 13 CASES This form is new and applies in chapter 13 cases. It requires the holder of a claim secured by a security interest in the debtor’s principal residence—or the holder’s agent—to file a notice of all postpetition fees, expenses, and charges within 180 days after they are incurred. The notice must be filed as a supplement to the claim holder’s proof of claim, and it must be served on the debtor, debtor’s counsel, and the trustee. The individual completing the form must sign and date it. By doing so, he or she declares under penalty of perjury that the information provided is true and correct to the best of that individual’s knowledge, information, and reasonable belief. The signature is also a certification that the standards of Rule 9011(b) are satisfied. The form may be found at: Chapter 13 Supplemental form.