Receiving a notice from a bankruptcy court that your debtor filed a petition seeking bankruptcy protection is not cause for celebration, but it is a normal part of business. Creditors should follow through with filing an appropriate proof of claim to establish a right to recover money in the event the bankrupt estate contains assets for distribution to unsecured creditors.
These are some of the areas that need special attention when preparing your proof of claim:
- Where should the proof of claim be filed? A proof of claim should be filed with the Clerk of Court in the same district and division where the debtor filed his or her petition. If the case is a large Chapter 11, the initial notice to creditors may direct you to file your proof of claim with a claims agent rather than the court clerk.
- When should the claim be filed? The initial notice or a subsequent order usually sets forth the deadline for filing a proof of claim. Docket the date on your calendar and be sure to file your proof of claim before the deadline.
- Who is the debtor? In cases where there are multiple debtor affiliates and corporations, be sure to make proper inquiries and verify which debtor is responsible for the debt owed to you. File your proof of claim accordingly.
- What should be attached to the proof of claim? If a claim is based on a document, such as an invoice or statement, then you must file a copy of the document with the proof of claim. In some large cases, court orders will set out specific additional directions for filing a proof of claim. If your claim is secured, you must include evidence that your claim is secured and perfected, such as a copy of the UCC financing statement and promissory note. Secured creditors must also state the amount necessary to cure default, if any.
- Starting December 1, 2011, if the court finds a creditor failed to provide an itemization of interest, fees, expenses, and cure amount associated with its claim, the court may preclude the creditor from raising the omitted information in a further proceeding and/or award reasonable attorney fees caused by the failure to provide the information. Thus, if a debtor objects to a creditor’s claim, and the creditor has failed to file the required Itemization with its Proof of Claim, the creditor runs the risk of having its clam reduced since it would not be able to present the sums at a claims objection hearing.
The point of filing a proof of claim, of course, is to establish your right to recover money if any assets are available to be distributed. Protect your rights as a creditor by consulting with an experienced business litigation and transactional law firm. The attorneys at Glass & Goldberg provide high quality and cost-effective legal services and advice for clients in all aspects of business litigation and transactional law. Call us at (818) 888-2220, email us at firstname.lastname@example.org, or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.