The term “proof of claim” comes up in New York bankruptcy sometimes, and debtors often want to know what it means. For creditors, receiving them during a debtor’s bankruptcy means they need to know how to complete them. So what are they?
A proof of claim is a document a creditor in a bankruptcy files with the bankruptcy court to demonstrate that it is entitled to a distribution from the bankruptcy estate. The proof of claim will show how much the debtor owes the creditor, whether the debt is secured, and whether there are any arrearages. Secured creditors will be able to attach documentation that identifies the collateral securing the debt, estimates its value, and specifies whether its interest in the security has been “perfected.” Creditors that do not file a proof of claim do not receive anything from the distribution of the estate, except in chapter 11 cases under some circumstances.
In chapter 7 bankruptcies, the bankruptcy court will include a statement in the notice for the meeting of the creditors to not file a claim but that if they are required, a separate notice will be sent. The separate notice comes after the trustee files a discovery of assets notice. The trustee might change his or her mind and choose to send them to the creditors. Proofs of claim are common to chapter 13 bankruptcies because at least some of the creditors will receive a disbursement. In fact, the bankruptcy court automatically sends out proofs of claim to the creditors in a chapter 13 case.
Just because a creditor says something on a proof of claim doesn’t mean the debtor, trustee, or bankruptcy court is obligated to take it at face value. In chapter 13, debtors can object to a creditor’s proof of claim. In chapter 7, only the trustee can raise such an objection.
Most debtors (and creditors) don’t need to worry about proofs of claim. However, if a creditor makes a misstatement, then it will require an experienced New York bankruptcy lawyer to file an objection or notify the trustee to do so. For creditors, it might be necessary to hire a lawyer to help complete a proof of claim and defend against an objection.
For answers to more questions about proofs of claim, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.