In Chapter 13 bankruptcy, the debtor proposes a three- to five-year reorganization plan which creates terms for monthly payments on secured, priority, and unsecured debts, generally in that order. Creditors are repaid in full or in part, and in return, the debtor gets to keep all of his or her property. When the plan is successfully completed, the court will discharge the case, and the debtor will no longer be liable for any of the dischargeable debts included in the plan. A proof of claim is a legal document that helps the debtor’s creditors get paid while the bankruptcy is underway. Our Philadelphia bankruptcy lawyers explain how proofs of claims work in Pennsylvania bankruptcy cases, including what to do if a proof of claim contains inaccurate information.
What is a Proof of Claim in a Chapter 13 Bankruptcy Case?
When a debtor files for bankruptcy, the debtor’s creditors will be notified by the bankruptcy court (which, for residents of Southeastern Pennsylvania, is U.S. Bankruptcy Court for the Eastern District of Pennsylvania, having jurisdiction over Philadelphia, Bucks, Delaware, and Montgomery Counties). However, each creditor must file a document known as a “proof of claim” in order to receive any payments from the bankruptcy trustee, a court-appointed official whose job involves distributing the debtor’s monthly payments among creditors holding claims. In short, the proof of claim is a form, with enclosed supporting documentation, that says a creditor is owed money from the debtor.
If necessary, a debtor can also file a proof of claim on a creditor’s behalf, with help from a Chapter 13 bankruptcy attorney. This will ensure that the creditor is able to receive payment from the trustee, which is critical if the debtor wishes to protect his or her property. If, for instance, an auto loan company fails to file a proof of claim, it cannot collect payment from the trustee, meaning the debtor cannot prevent their vehicle from being repossessed. This type of situation can be remedied by filing a proof of claim on the creditor’s behalf. To do this, the debtor must file Form 410, a short, three-page bankruptcy document that prompts debtors to answer questions such as:
- “Who is the current creditor?”
- “Where should notices and payments to the creditor be sent?”
- “Do you know if anyone else has filed a proof of claim for this claim?”
- “What is the basis of the claim?”
- “Is all or part of the claim secured [by collateral]?”
You can download Form 410 from the website of the United States Courts.
Conversely, a debtor may wish to dispute information contained in a proof of claim which has been filed by a creditor. If the debtor feels that a creditor’s proof of claim contains inaccurate, incomplete, or outdated information – for example, perhaps the amount specified in the claim is not correct, or perhaps the claim has been designated as a priority or secured claim when it should have been classified as a nonpriority unsecured claim – the debtor can generally file an objection with assistance from his or her Chapter 13 or Chapter 7 lawyer in Philadelphia.
The creditors in a Chapter 13 case will typically file proofs of claims. Creditors may or may not file proofs of claims in a Chapter 7 case, depending on the extent to which the debtor’s assets are protected by the federal or Pennsylvania bankruptcy exemptions.
How Long Do Creditors Have to File a Proof of Claim?
Creditors typically have a period of 90 days in which to file a proof of claim. Critically, the 90 days start counting down not from the actual filing date, but from the scheduled date of the first meeting of creditors, which is also called a “341 meeting” or “341 hearing.” The 90-day deadline is established by Rule 3002(c) of the Federal Rules of Bankruptcy Procedure, which provides that, with certain exceptions for government entities, “In a [C]hapter 7 liquidation… or [C]hapter 13 individual’s debt adjustment case, 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) of the Code.”
Generally speaking, creditors should take care of filing their own proofs of claim. However, if any problems involving a proof of claim should arise, your Delaware County bankruptcy attorney will be there to help resolve the issue, so that your creditors receive timely payments and your reorganization plan is able to move smoothly forward.
Philadelphia Bankruptcy Attorneys Serving Bucks, Delaware, and Montgomery Counties
If you’re a resident of Southeastern Pennsylvania and are having trouble keeping up with mortgage payments, car loan payments, utility bills, or other expenses, bankruptcy may be an effective solution for reorganizing your debt while protecting your possessions and putting a stop to creditor harassment. If you live in the Greater Philadelphia area, the Bucks County bankruptcy attorneys of Sadek & Cooper Law Offices may be able to help give you the clean financial slate you deserve.
To talk about your options in a free legal consultation with our Montgomery County bankruptcy lawyers, call our law offices at (215)-545-0008 today.