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When a person or entity files for bankruptcy, their creditors are required to file a proof of claim showing the nature and amount of the debt owed to them. With the appropriate filing, the next step would be to find out what options are available to them. On the other hand, any errors in this filing may result in the creditor losing out on some or all of what they are owed.

Thus, it’s absolutely vital that anyone who is owed money review the bankruptcy schedule and file a proof of claim. Whether intentionally or by mistake, debtors often misrepresent the amount of money they owe. Creditors must closely analyze the filing to make sure the debtor accurately reported the amount owed and be prepared to prove the actual amount owed.

Even if the debtor accurately represents the amount owed, a creditor cannot receive payment without filing a proof of claim. In almost every bankruptcy, the debtor does not have enough money to pay all the creditors. The money that is available will generally be split between creditors based on the amount of their claims, so creditors will lose out if their claim is underrepresented.

Filing a Proof of Claim

When a person or business files for bankruptcy, they must file a schedule listing all of their debts. The bankruptcy court then mails copies of the schedule to all listed creditors, along with a proof of claim form. To receive any payment, a creditor must fill out and return the form within a set period of time, usually 90 days after the meeting of the creditors.

The proof of claim form requires the creditor to list the amount due on the date of the bankruptcy filing, the basis for the claim, whether the claim is secured, and whether the claim is entitled to priority. In addition, as the name of the form suggests, the creditor must attach proof of the debt, such as the original loan agreement or a billing statement establishing the amount owed.

Once a valid proof of claim has been filed, the court will accept the claim as long as the debtor or another creditor does not contest it. An experienced attorney can help accurately fill out the form, ensure that the attached proof will be sufficient to persuade the court of the debt’s validity, and carefully review the situation as a whole in order to avoid any future challenges to the claim.

Disputed Claims

Other parties to a bankruptcy case such as the debtor or other creditors may also contest a claim. The debtor might challenge a claim if it won’t be discharged in bankruptcy or the creditor has a lien on property, like a house or a car. If the debt will be discharged in bankruptcy, debtors usually have little incentive to challenge the exact amount, but other creditors may still dispute it.

Challenges might relate to the validity of the debt itself or the exact amount owed. Bankruptcy has complicated rules for calculating interest, so it’s best to consult a lawyer before filing a proof of claim to make sure that it doesn’t open the creditor up to a challenge. In a recent bankruptcy, the movie studio behind John Wick filed a lawsuit accusing a lender of trying to claim $1.8 million more in interest than was actually due.

Regardless of the reason for the challenge, it’s a very good idea to consult a lawyer if a proof of claim is challenged. The bankruptcy court will consider evidence presented by both the challenger and the claimant. In simpler cases, the judge can decide the issue based on written motions. However, more complicated cases will likely require the court to conduct an adversary proceeding complete with witness testimony. 

Whether the issue is decided on the motions or is an adversary proceeding, objections to claims involve highly complex and technical legal arguments. In addition, bankruptcy court procedures are often difficult to navigate. A claim will always have the best chance of surviving an objection if the creditor has an experienced bankruptcy lawyer to argue on their behalf.

What Should I Do if Someone Who Owes Me Money Has Filed for Bankruptcy?

If someone who owes you money has filed or threatens to file for bankruptcy, contact Rosenblum Law today for a free consultation. Bankruptcy has strict deadlines, so it’s important to act fast to protect your rights. We’ve represented both debtors and creditors, so we know the process from both sides and can get you as much of what you’re owed as possible. Call 888-815-3649 or email us.