Creditors must file a proof of claim in order to receive payments as part of a bankruptcy case. This practice occurs in Chapter 13 bankruptcy cases and Chapter 7 cases in which there are assets available to be distributed. As of Dec. 1, 2017, the Federal Rules of Bankruptcy Procedure enacted new rules regarding filing a proof of claim:
- It clarified that secured creditors are required to file a proof of claim; and
- It shortened the deadline for a non-governmental creditor to file a proof of claim from 90 days to 70 days.
Both of these changes are meant to favor the debtor in a bankruptcy case. The shortened deadline may allow a Chapter 13 bankruptcy filer to know sooner what claims the creditors have in the case. Debtors must monitor proof of claim filings to determine whether they need to contest a filing.
Reasons to Contest
Debtors can file a written objection to a proof of claim. Reasons for objection may include:
- The amount claimed is inaccurate or includes improper charges;
- The claim is for a non-existent debt;
- The claim is a duplicate of another claim;
- The creditor incorrectly identified the claim as a secured or priority debt;
- The claim was filed past the deadline or lacked supporting documentation; or
- The creditor filed the claim in order to harass the debtor.
Who Can File an Objection?
Any party with a vested interest in the outcome of the bankruptcy case can file an objection. The bankruptcy trustee can contest a proof of claim that he or she believes is inaccurate or lacks standing.
If a secured creditor does not file a proof of claim during a bankruptcy, the lien on the property securing the debt can still exist afterward. Thus, the debtor may be responsible for staying current on loan payments or risk losing the property. This can be problematic in a Chapter 13 bankruptcy case because the debtor's financial resources are focused on the bankruptcy repayment plan. However, the debtor can file a proof of claim for the secured creditor so that the debt will be included in the Chapter 13 bankruptcy.
Protecting Your Financial Interests
You should not rely on a bankruptcy trustee or court to guard you against creditors during your bankruptcy case. A Frisco, Texas, bankruptcy attorney at The Page Law Firm will monitor your creditors' actions and object on your behalf when necessary. Schedule a free consultation by calling 214-618-2101.