Objecting to a Proof of Claim in Bankruptcy
Learn how to challenge a proof of claim in chapter 7 or Chapter 13 bankruptcy.
Any party in interest has the right to object to a proof of claim in a Chapter 13 or Chapter 7 case. A proof of claim is a form that is filed by a creditor (and sometimes the debtor) asserting the right to be paid out of the proceeds of the debtor’s bankruptcy estate. (For a more detailed explanation, see What Is a Proof of Claim in Bankruptcy.) A Chapter 7 debtor is rarely considered a party in interest and may not be entitled to file an objection to claim. A Chapter 13 debtor is always permitted to file an objection to claim. The bankruptcy laws set forth several reasons why you may want to object to a claim.
(Learn more about how Chapter 7 and Chapter 13 bankruptcy work.)
Who Can Object to a Proof of Claim?
Any “party in interest” has the right to object to a claim. A party in interest is someone who will be impacted by the payment of the claim. Some examples of a party in interest are a bankruptcy trustee, other creditors in the same bankruptcy case, and the debtor.
Objecting to a Claim in a Chapter 7 Case
Most Chapter 7 cases are “no asset” cases which means there are no funds to distribute to creditors out of the bankruptcy estate. (Learn more about no-asset Chapter 7 cases.) In the event that there are funds to distribute, the trustee will instruct all creditors to file a proof of claim. A Chapter 7 debtor only has standing to object to a claim if he or she will be financially impacted by the payment of the claim. This rarely is the case as there are generally no funds leftover for the debtor after the trustee has finished paying on all the claims.
Objecting to a Claim in Chapter 13 Case
A Chapter 13 debtor always has the right to object to claim even if the plan provides that 0% of creditors’ claims will be paid over the life of the plan.
When Should You Object to a Proof of Claim?
A proof of claim is considered valid unless someone objects to the claim. The burden shifts to the objecting party to prove to the court that the claim is invalid and should not be paid. Some of the more common reasons to object to a proof of claim include:
• the creditor fails to attach sufficient documentation to prove that a debt is owed
• the amount of the claim is incorrect
• the claim is filed in the wrong bankruptcy case or names the wrong debtor
• the same claim was filed more than once
• the classification of the claim as secured or priority is incorrect, and
• the claim states improper interest amounts or fees.
How Do You Object to a Proof of Claim in Bankruptcy?
An objection to a proof of claim must be in writing and filed with the bankruptcy court. A copy of the objection and the notice of court hearing date must be mailed to the creditor, the trustee and the debtor. If the creditor fails to respond to the objection by the time set forth by the court, the objection will be upheld. If the creditor responds to the objection, the issue will go before a bankruptcy judge who will either uphold the objection and disallow the claim or overrule the objection and allow the claim. Keep in mind that the process of objecting to a claim may vary from court to court so you should always review the local court rules before filing an objection.