Creditors in bankruptcy cases have debts paid either by waiting for a distribution from the estate (unsecured creditors), by reclaiming property from the bankruptcy estate (secured creditors), or by obtaining a judgment that the debt is not dischargeable. The timing and procedure depend upon the chapter of the bankruptcy case. Requests for information regarding payment on a claim should be directed to the trustee assigned to the case.
Secured Creditors and Motions for Relief From the Automatic Stay
Creditors whose debts are secured by real or personal property can try to reclaim the property from the bankruptcy estate. In most situations this requires the filing of a Motion for Relief from the Automatic Stay. The court has its own mandatory form motions regarding relief from the automatic stay. The forms differ depending upon what type of property the creditor desires to reclaim. There are many procedural rules to follow, and the secured creditor must prove to the court that it is entitled to reclaim the property. It is highly recommended to consult a bankruptcy attorney to determine if the property can be reclaimed or if a Motion for Relief from the Automatic Stay is necessary.
Creditors Involved in Lawsuits in Other Courts
Creditors who are involved in lawsuits with the debtor in other courts need permission to continue the lawsuit. In most situations this requires the filing of a Motion for Relief from the Automatic Stay. There are many procedural rules to follow, and the creditor must prove to the court that it is entitled to proceed with the lawsuit in another court. It is highly recommended to consult a bankruptcy attorney.
Unsecured Creditors and Adversary Proceedings to Determine Debts Non-dischargeable
Regardless of what chapter bankruptcy is filed and whether or not a debtor lists a creditor on the Schedules, a creditor can file an Adversary Proceeding to determine that a debt is not dischargeable. In an adversary proceeding, a creditor is required to prove to the court that the debt is non-dischargeable. There are many procedures and deadlines, and it is highly recommended that the creditor consult a bankruptcy attorney.
Creditors Waiting for a Distribution from the Bankruptcy Estate
To get paid from a bankruptcy estate, it may be necessary to file a document titled “Proof of Claim.”
(1) Obtaining a Proof of Claim Form
In chapter 7 cases a Proof of Claim form may be included with the Notice of Chapter 7 Bankruptcy. See the Court Location for the Clerk’s Offices where a Proof of Claim can be obtained in person. Or you may be eligible to file a Proof of Claim electronically.
(2) Filing a Proof of Claim
When filing a Proof of Claim, be sure to attach photocopies of supporting documents to the original Proof of Claim form (NOTE: Do not send the “original” copies of the supporting documentation). A creditor may also send to the Clerk’s Office a letter with the creditor’s name and address, the debtor's name and bankruptcy case number, the amount owed to the creditor, the type of claim (secured, unsecured, priority), the date the debt was incurred, and any documentation that supports the claim. A creditor may need to file a Proof of Claim with the court within 90 days of the first date set for the 341(a) Meeting of Creditors, and possibly even earlier. To be aware of the applicable deadline, refer to Federal Rules of Bankruptcy Procedure Rule 3002(c) and check for relevant court orders in the bankruptcy docket for the debtor who owes the money. An original and one copy of the Proof of Claim are required. If a creditor wishes to receive a conformed copy of the Proof of Claim, please enclose one extra copy of the Proof of Claim and a self-addressed, stamped envelope.
(3) Deciding if a Creditor Needs to File a Proof of Claim
Please consult the categories below to determine if you need to file a Proof of Claim or are allowed to file a Proof of Claim.
a. Creditors Which are Listed on Debtor’s Schedules
- Chapter 7 Bankruptcy Cases – For Chapter 7 cases, if a creditor is listed in the Schedules and it appears that there will be a distribution for creditors, the clerk’s office will send a Proof of Claim at the beginning of the bankruptcy case along with the Notice of Chapter 7 Bankruptcy, Meeting of Creditors, Deadlines. However, for many chapter 7 bankruptcy cases a distribution is not likely, and the same Notice of Chapter 7 Bankruptcy will specifically state that creditors should not file a Proof of Claim unless the court sends a follow-up notice.
- Chapter 11 Bankruptcy Cases – For chapter 11 cases, it is not necessary to wait to receive the Notice of Chapter 11 Bankruptcy, Meeting of Creditors, Deadlines before a creditor files a Proof of Claim. A notice that identifies a deadline for filing Proofs of Claims will be sent to all creditors.
- Chapter 13 Bankruptcy Cases - For chapter 13 cases, it is not necessary to wait to receive the Notice of Chapter 13 Bankruptcy, Meeting of Creditors, Deadlines before a creditor may file a Proof of Claim. In fact, creditors must file a Proof of Claim. Chapter 13 bankruptcy cases move quickly, and generally within the first two to three months, the court will conduct a Chapter 13 Plan confirmation hearing.
b. Creditors Which are Not Listed on Debtor’s Schedules
Sometimes a debtor does not list all of its creditors. If a creditor is not listed on the debtor’s Schedules, the creditor can file a Proof of Claim to notify the court and other parties the amount of money that it is owed.
c. Creditors Which Dispute the Claim Listed in Debtor’s Schedules
If a creditor disputes the amount of its claim that is listed in the debtor’s Schedules, the creditor must timely file a Proof of Claim to notify the court and other parties the amount of money that it is owed.
NOTE: Filing a Proof of Claim may limit a creditor’s right to a jury trial if the creditor is sued by a trustee or a chapter 11 Debtor-in-Possession. It is important to consult a bankruptcy attorney.