Creditors rarely file a Proof of Claim in a Chapter 7 (or straight Bankruptcy as it is sometimes called) because in most instances the Debtor’s assets fall within their Exemptions and thus there are no funds available to receive any payment. A Chapter 7 is usually over in approximately 3 to 3 ½ months and every debt that you listed in your petition is wiped out or discharged except the ones you reaffirm. Please see the following blog for more information on Reaffirmation Agreements.
However, in a Chapter 13 Bankruptcy case a Debtor will pay their extra income each month for a period of 36 to 60 months toward their debts in a repayment plan. The creditors must file a Proof of Claim with the Court proving their debt in order to get paid. However, they only have a limited amount of time to file their claim, approximately 4 months from your file date. Governmental entities are given additional time, usually 6 months from the date you file your case. This is called the proof of claim deadline.
But what happens when they miss their deadline? It depends. If it is an unsecured debt such as a personal loan or medical bill or credit card, you celebrate. You might even be able to pay your case off early. But if the debt was for your mortgage arrears, automobile/truck/SUV loan, back child support/alimony or back taxes, then you need an experienced attorney to be paying attention so that they can file that claim for those respective creditors. It is usually the whole reason you filed the Chapter 13 Bankruptcy in the first place to catch up on the mortgage arrears that you were behind on or your vehicle loan or back child support/alimony or taxes. If those creditors miss their proof of claim deadline and your attorney does not catch it, then that debt will still be owed after your case is over. In some instances, that money that you have allotted to go toward your vehicle loan will then go toward your unsecured debt instead. In that same regard, you will not receive your title at the conclusion of your case or you may be thrown right back into foreclosure after your case. The sheriff may serve that back child support subpoena on you or the IRS hit you with a tax lien or garnishment of wages as soon as your case is discharged.
So to answer the initial question, “No, creditors are not the only ones that can or should file Proof of Claims”. Your Bankruptcy attorney needs be paying attention to make sure all important claims are filed in your case and also be experienced enough to file those claims on your behalf should the Creditor fail to do so. Your Bankruptcy attorney has 30 days from the creditor’s deadline to file that claim on their behalf or is forever barred from doing so.
As you can see it is important to have an attorney who will be constantly vigilant with your file. At Bond & Botes we treat every case with care and are very diligent to make sure that your claims are filed and in turn paid so that you can be free of your debt once you are discharged. Please call one of our conveniently located offices to set up a private consultation with one of our experienced attorneys.
We will analyze your situation and help you make the best decision possible to help you navigate your financial problems.
Grant McNutt is a Managing Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Science from the University of Alabama, and a Juris Doctorate from the Birmingham School of Law. He has been practicing Consumer Bankruptcy Law since 1999.Read his full bio here.