You just heard that a customer has filed for bankruptcy — what do you do now? One of the first steps is to determine whether you should file a proof of claim.
How will I be alerted about the bankruptcy?
When a bankruptcy case is filed, the debtor is required to list all of his creditors in the petition. Subsequently, the clerk of the bankruptcy court will send out a notice to all listed creditors that the debtor has filed bankruptcy (this is normally known as an “Official Form 309”). Additional important information is included on the notice of bankruptcy, including the date and time of the Section 341 meeting of creditors, the deadline to file an objection to the debtor’s discharge or dischargeability of a particular debt, and the deadline to file a proof of claim.
Please see our prior Bradley’s Bankruptcy Basics posts for more information about what to do when you receive a notice of bankruptcy, as well as a helpful creditors’ checklist of steps you may want to take.
What is a proof of claim?
A proof of claim is an official bankruptcy form that is filled out by a creditor to indicate the amount of debt that a debtor owed the creditor as of the date the debtor filed for bankruptcy. A proof of claim is a standard form that can be downloaded here. A blank proof of claim form may also be included in the notice of the bankruptcy filing you receive from the court clerk. A creditor must fill out and submit a proof of claim to receive payment on the claim. Here is a mock example of a completed proof of claim form as well as a list of corresponding footnotes to help further explain the form from the perspective of a typical debtor and creditor.
Who should file a proof of claim?
If you are a secured or unsecured creditor in a Chapter 11, 12 or 13 bankruptcy, you must file a proof of claim to receive payment during the bankruptcy case. Depending on your claim and the terms of the plan, you might never receive payment if you don’t file a proof of claim. If you are a creditor in a Chapter 7 bankruptcy case, you will generally not file a proof of claim if it is a “no asset” case. However, you will need to file a proof of claim in a Chapter 7 case if the trustee finds assets during the review period. If this happens, you will get a notice from the trustee to file a proof of claim, and it will indicate the deadline by when the proof of claim must be filed.
What is the deadline to file a proof of claim?
Non-governmental creditors have 70 days after the bankruptcy filing date to file a proof of claim. The notice you receive alerting you that a bankruptcy case has been filed will also include the deadline for filing a proof of claim (unless the case is a no-asset Chapter 7 case, as discussed above).
What information does a proof of claim ask for?
- Debtor’s name
- Bankruptcy case number
- Your contact information (including mailing address)
- Amount owed as of the petition date (the date the bankruptcy case was filed)
- Why the money is owed (loan, lease, services performed, etc.)
- Type of claim (secured vs. unsecured); more information about this distinction as it applies in bankruptcy cases will be included in subsequent Bradley’s Bankruptcy Basics content
- Supporting documentation; a creditor should attach documents that reflect the debt that is owed to the creditor (lease agreement, contract, court judgment, etc.)
How do I submit my proof of claim?
The notice alerting you of the bankruptcy case will include information regarding how to submit your proof of claim. The proof of claim must be filed in the specific court in which the debtor’s bankruptcy case is proceeding, and it must reference the correct case number. A proof of claim is normally submitted in one of three ways (the notice will often dictate what method should be used):
- Mailed to the court at the address listed on the notice (the notice should also state whether regular mail and/or overnight courier services are accepted)
- Electronically via the court’s website
- Electronically via a third-party bankruptcy claims agent
You do not need counsel to file a proof of claim. However, depending on the complexity of the claim and/or supporting documentation, it may be beneficial to seek advice before filing. For example, in an Eleventh Circuit case, In re J.H. Investment Services, Inc., the IRS filed a proof of claim asserting that the entire $46 million claim was secured while the debtor’s assets securing the claim were valued at only $750,000. The IRS did not indicate on its proof of claim any deficiency amount that was an unsecured claim, instead listing the whole $46 million as secured. As a result, the IRS did not receive any payment toward its unsecured deficiency claim. For proofs of claim that are not straightforward, are collateralized by multiple assets, or are for large amounts of debt, retaining counsel may be advisable to ensure the creditor is maximizing its opportunity for recovery.