Filing a proof of claim in a bankruptcy case

Proof of Claim

What is a Proof of Claim?

A proof of claim is a document that a creditor prepares and files with the Bankruptcy Court that sets forth the creditor’s claim and right to receive a distribution in a bankruptcy case. To be effective, the proof of claim must be properly prepared, conform to the Court’s official form, and as necessary, contain adequate supporting information. The purpose is to provide notice of a creditor’s claim to parties in the case. In many bankruptcy proceedings, a creditor will not receive a distribution without having properly and timely filed claim.

Consequences of Not Filing a Proof of Claim

A creditor is not required to file a proof of claim, but in choosing not to do so, may give-up substantial rights. By not filing a claim, a creditor may lose its right to vote for or against a bankruptcy plan and its ability to collect anything in the bankruptcy case. Moreover, even if a creditor does not file a proof of claim, its claim against the debtor generally is discharged and may not be pursued.

Late-Filed Proof of Claim

Deadlines for filing claims vary by the type of bankruptcy proceeding but are generally set by notice or a court order. Bankruptcy Courts strictly enforce the proofs of claim filing deadline (known as the claims bar date) and will only extend the deadline under special circumstances. Accordingly, the claims bar date is one of the most important deadlines in a bankruptcy case.

When Not to File a Proof of Claim

There are often strategic considerations in deciding whether or not to file a claim in a bankruptcy case. By filing a claim, the creditor is subjecting itself to the Bankruptcy Court’s jurisdiction and parties may conduct discovery regarding the claim. Moreover, while jurisdictional issues are a hot topic in bankruptcy courts, a debtor may attempt to assert its counterclaims against a creditor in the Bankruptcy Court or remove any pending litigation to the Bankruptcy Court to be tried before a judge, not a jury.

These are only the initial issues relating to filing a proof of claim that a creditor should consider. In conducting a analysis regarding how best to pursue its claim in a bankruptcy case, a creditor should work with an attorney that focuses their practice on bankruptcy law.

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