June 13, 2021

Why Would You Choose to File a Proof of Claim on Behalf of a Creditor in Your Chapter 13

When you file Chapter 13, you include in your schedules the names and addresses of all of your creditors.  The Clerk of Court then mails out a notice of your filing to those creditors along with a form called a Proof of Claim form.

Under the Federal Rules of Bankruptcy Procedure, your creditors must file their proofs of claim within 90 days after the first date set for the Section 341 first meeting of creditors.  Since 341 hearings are usually set about 30 days after you file, this means that, generally, creditors have about 4 months to file their claims.  The deadline for creditors to file claims is called the bar date.

What happens, however, if a creditor fails to file a proof of claim in your Chapter 13.  If the claim is an unsecured claim, like a credit card debt or a medical debt, that creditor does not get payments from the Chapter 13 trustee and when the final discharge order is issued, that unsecured creditor’s claim is discharged, or wiped out.  Assuming you provided a valid address, unsecured creditors who received notice but who do not file a proof of claim cannot come back and sue you post discharge.

Secured and priority creditors are a different story.

In the case of a secured creditor, like a mortgage company or a vehicle lender, the Chapter 13 discharge would wipe out your personal liability but the lender’s lien against the property remains valid.  Thus, your vehicle, house, furniture, jewelry or other secured debt could be repossessed or foreclosed post bankruptcy, although you would not have any personal liability for any deficiency claim.

While some of these items may lose significant value during the 5 years of your plan, some secured collateral does not lose value and could be at risk.  Further, some secured claims can be crammed down in a Chapter 13, thus reducing the balance to the value of the collateral.

Priority debts like taxes and child support will survive your bankruptcy.  If these creditors do not file claims, your unsecured creditors will get a higher percentage recovery and when your case is over you will owe the tax or child support, plus interest and/or finance charge and you will have paid your unsecureds more than they would have received if the priority creditor had filed a claim.

Your attorney will advise you about how to proceed, but in many cases it can be to your advantage to file a substitute proof of claim on behalf of your creditor if that creditor does not file a claim within the designated time window.

Filing a claim on behalf of a creditor is simple, although this process should be handled by your lawyer.  Substitute claims must be served on the creditor who may object to your claim calculation.  If the creditor does not object in a timely manner, that claim will be considered binding and will protect you if the creditor tries to come after you.

Your lawyer should have on his checklist a reminder to review all claims as of the bar date and to advise you regarding the filing of substitute proofs of claim.  Bar date review is another way that your attorney can help maximize the benefits of Chapter 13 bankruptcy.



Ginsberg Law Offices, P.C.
1854 Independence Square


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Jonathan Ginsberg has been in private law practice since 1987. He writes and teaches about Chapter 7 and Chapter 13 bankruptcy protection.