In both personal and business bankruptcy cases, creditors may receive at least some payment on debts owed. Creditors must file a proof of claim form to assert their rights to payment for many debt types. There is a standard proof of claim form to use.
While the Proof of Claim form and instructions are short, mistakes can be made. Learn about the basics of a proof of claim, how and when it is used, and the common mistakes to avoid.
File On Time
Filing a claim on time is important, so know the deadline or bar date. The bar date is similar to a statute of limitations (time limit to bring a legal claim). The bar date for filing a proof of claim is within 90 days of the first date set for the meeting of creditors in a bankruptcy case. This time limit applies to creditors that aren't governmental entities and must be strictly observed.
The bar date for governmental claims is 180 days after the date of the order for relief (the court's order stating bankruptcy law protection applies to the filer's case).
Filing time limits do have some exceptions. The court has the power to extend the filing time if a creditor shows excusable extenuating circumstances, or the agent for an underage or incompetent creditor needs more time to file.
With few exceptions, claims filed late aren't allowed. Creditors who learn of a bankruptcy filing should quickly file a proof of claim even if they don't receive official notice from the court. Filing as soon as you find out about the bankruptcy may help in persuading the court to allow your claim.
Avoid Common Mistakes
Some common mistakes creditors make when filling out the Proof of Claim form are:
- Misuse of check boxes
- Failure to provide proof of perfection of a security interest
- Improper claim of priority status
- Failure to check the box showing the form is an amended claim
Misuse of Check Boxes
Official Form 10 contains boxes to check only for secured and priority claims. These claims are generally first in line for payment, and creditors should only claim this status if there is a good reason to do so. There are no boxes to check for unsecured, non-priority claims.
Include Supporting Documents
Creditors need to attach copies of documents supporting their claims. This can include copies of certificates of title for motor vehicles and manufactured homes, mortgages and deeds of trust for real estate, and recorded UCC-1 financing statements for security interests in other personal property.
Secured creditors don't have to file proof of claim forms. A debt is secured when it's backed by collateral or a lien on property that can be used as a source of payment. These rights in a debtor's collateral are called security interests, and they're created by documents such as security agreements, mortgages and auto loans.
However, a secured creditor may file claims in some situations, such as when part of the debt is unsecured. This means the property given as collateral is worth less than the debt owed. A proof of claim form is needed if the creditor wants to be paid on the unsecured part of its claim.
Documents showing a valid security interest, meaning it was recorded or perfected in public records, should be included. If the documentation is lengthy, a summary can be used.
Duplicate proofs of claim are a problem for bankruptcy trustees. The proof of claim contains a box to check if it replaces or amends a previously filed proof of claim. Creditors often fail to check this box for amended claims. This creates confusion because it isn't clear whether or not the latest claim is a new, separate claim.
When an amended claim isn't properly marked, the claim may not be allowed. The bankruptcy trustee or the debtor may file an objection to the claim, on grounds it is a duplicate. Creditors can avoid problems by checking the right box, and attaching an explanation for the amended claim form if needed.
Questions for Your Attorney
- When will a bankruptcy court accept a proof of claim that is filed late?
- Is it best for a secured creditor to file a proof of claim form in case part of the debt ends up being unsecured?
- Must a proof of claim be submitted on the official bankruptcy form?