What is a Proof of Claim?
An essential element in the process of collecting debts in a bankruptcy, the proof of claim legally documents a creditor’s rights to collect repayments from a debtor.
When a debtor files for chapter 11 bankruptcy protection, that filing may have a serious impact on a creditor’s ability to meet its business and personal financial obligations.
While a proof of claim is not a guarantee of repayment it can determine how, when, and whether a creditor will receive payment from such a debtor.
Are all creditors required to file a proof of claim when a debtor files for bankruptcy?
The answer to this question depends on how accurately the debtor has described the nature and amount of debt it still owes and whether they have described the debt as disputed.
What are some examples of when it is necessary to file a proof of claim against a debtor who is filing for Chapter 11 bankruptcy protection?
If any of the following problems are identified on a debtor’s schedule of assets and liabilities, it will be necessary to file a proof of claim:
- The debt is miscategorized on the schedule
- The amount owed is incorrect
- The creditor is not listed on the schedule
- The creditor’s claim is designed as disputed, contingent, or unliquidated
While a “proof of claim” filing is not required in a Chapter 11 bankruptcy case, filing one can provide the creditor with some peace of mind and the benefit of legal protection.
If the claim is never filed, the court will accept that the information provided by the debtor is accurate and complete.
A proof of claim, however, provides a more accurate record about existing debt which supersedes the information the debtor has listed in their schedule of assets and liabilities.
What is the best way to file a Proof of Claim?
Most often, creditors will automatically receive a Form 410 Proof of Claim once the debtor has filed for bankruptcy, which is sent to all creditors along with the notice of bankruptcy.
Accordingly, the notice provides instructions on how to file the claim and where it must be submitted.
A deadline, or “bar date” will also be included, indicating the last day a proof of claim can be file in this case.
Most creditors are unaware of the complexities of such a filing and may underestimate how long it will take to complete.
What must a Proof of Claim include?
A proof of claim must include a description of the type of claim being made against the debtor, the amount of the debt which remains outstanding, and its priority status.
Our attorneys will gather all of the information necessary to complete the form in a timely manner, including certain details about the debt and the debtor, including:
- The name of the debtor and the bankruptcy case number
- Information about the creditor, including business name and contact details
- The debt category, such as secured or unsecured
- The amount of the debt that remained outstanding on the date of the debtor’s bankruptcy petition
- Any supporting documents that support the claim, such as contracts, delivery receipts, open invoices, ledgers, statements, or other relevant agreements
Dilendorf Law Firm’s experienced team of bankruptcy lawyers understand the process of filing a proof of claim and frequently consult with clients who are attempting to collect from a debtor in the process of bankruptcy.
We recommend consulting with one of our attorneys as soon as one receives notice of a debtor’s bankruptcy petition.
Our team supports our clients throughout the process and helps them better understand their creditors’ rights in a Chapter 11 bankruptcy.