What Is a Proof of Claim in Bankruptcy?

Information about proofs of claims in Chapter 7 and Chapter 13 bankruptcy, and whether you can object.

A proof of claim is the paperwork that a creditor must file before getting paid in a bankruptcy case. Under the bankruptcy payment system, some debts—like income tax and domestic support obligations—have “priority” status and are paid before other claims.

The proof of claim tells the bankruptcy trustee about the type of claim, as well as how much a creditor is owed, so the trustee can determine the amount to pay the creditor if anything. Read on to learn who can file a proof of claim, filing procedures, and how to object to a proof of claim.

(For an overview of Chapter 7 and Chapter 13 as well as comprehensive articles on how they work, see our Chapter 7 Bankruptcy and Chapter 13 Bankruptcy areas.)

Who Must File a Proof of Claim?

All creditors who wish to be paid out of bankruptcy funds must file a proof of claim. (FRBP 3002.) On December 1, 2017, the law was amended to make clear that in Chapters 7, 12 and 13 bankruptcy cases, a secured, unsecured, or equity secured creditor (with a few exceptions) must file a proof of claim to receive money from the bankruptcy estate.

Of course, if funds aren’t available for distribution—such as in a Chapter 7 “no-asset” case—a creditor won’t be told to file a proof of claim. That status will change if the trustee finds undisclosed assets during the review period. Then the trustee will instruct creditors to file a proof of claim.

Secured Creditors and Liens

Like all creditors, a secured creditor—such as a mortgage or vehicle lender—must file a claim in order to receive money through the bankruptcy estate (with a few exceptions). However, even if the secured creditor doesn’t file a proof of claim, the creditor won’t lose its lien.

This rule can be problematic for a debtor in a Chapter 12 or 13 case. Why? When a lien is in place, the debtor can keep the property securing the debt only if the debtor remains current on the loan. If the debtor doesn’t pay as agreed, the creditor will be able to take back the property, sell it at auction, and use the funds to pay down the loan.

As a practical matter, if a secured lender doesn’t file a proof of claim in a Chapter 12 or 13 case (and won’t receive monthly plan payments), a debtor who wants to keep the property securing the claim (such as a house or car) has a couple of options.

  • Pay outside of the plan. The debtor can make the payments directly to the creditor (instead of through the plan). However, if the debtor arranged to make the payment directly, it likely won’t be possible. Most of the debtor’s funds go into the plan leaving nothing left for a hefty payment.
  • File a proof of claim for the creditor. The debtor can file a proof of claim on behalf of the creditor. Doing so will allow the trustee to use bankruptcy plan payments to maintain the secured payment.

When Must a Proof of Claim Be Filed in Chapter 7, 12, and 13 Bankruptcy Cases?

The deadline for filing a proof of claim for non-governmental creditors in a Chapter 7, 12, or Chapter 13 bankruptcy case is 70 days after the petition filing date. (On December 1, 2017, the previous deadline of 90 days after the first meeting of the creditors was shortened to the current period). Government entities have additional time. They must file a proof of claim within 180 days after the date of the order for relief (the bankruptcy filing date).

The first notice sent to creditors includes the deadline for filing proofs of claim. This notice informs creditors that a petition has been filed and indicates the date set for the meeting of creditors. This notice also sets the last date on which they can file objections to the discharge.

Although the court doesn’t usually permit extensions once the deadline has passed, the court has the power to extend the filing time if a creditor shows extenuating circumstances.

What Must the Creditor Include in a Proof of Claim?

Here’s what the creditor must include in its proof of claim.

Formal Proof of Claim

A proof of claim must conform substantially with the official bankruptcy form, Proof of Claim (Form 410). You can download all of the official bankruptcy forms, including Form 410 from the U.S. Courts Bankruptcy Forms page.

The information a creditor will need to include is as follows:

  • the debtor’s name and the bankruptcy case number
  • the creditor’s information, including a mailing address
  • the amount owed as of the petition date
  • the basis for the claim (such as goods or services purchased, a loan or credit card balance, a personal injury or wrongful death award), and
  • the type of claim (secured or unsecured).

The creditor should attach supporting documentation, such as the contract, as evidence of the claim. Official attachment forms are available. Also, the creditor or an authorized representative must sign the proof of claim.

Informal Proof of Claim

Some courts will accept an informal proof of claim from a creditor if it meets five requirements:

  • the proof is in writing
  • the writing includes a demand against the bankruptcy estate
  • the writing demonstrates the intent to hold the estate liable
  • the writing is filed with the bankruptcy court, and
  • allowing the claim would be fair under the circumstances of the case.

Although a bankruptcy judge will consider these requirements, the decision about whether an informal proof of claim will be allowed is ultimately within the discretion of the bankruptcy judge.

Objecting to a Proof of Claim

The court usually accepts the proof of claim and its stated amount unless the debtor, trustee, or another interested party objects.

Some of the most common reasons that someone might object to a claim include:

  • the amount is incorrect
  • the claim includes improper interest or other penalty charges
  • the claim indicates that it is a priority or secured claim when it is not
  • the creditor filed the claim for the purpose of harassing the debtor, or
  • the creditor did not attach supporting documentation.

In order to object to a creditor's claim, the party objecting must file a written objection with the bankruptcy court and serve a copy and the notice of hearing on the creditor, the debtor, and trustee at least 30 days before a scheduled hearing.

Who Can Object to a Chapter 7 Bankruptcy Claim?

Only a “party in interest” can object to a claim in a Chapter 7 bankruptcy case. A “party in interest” is a person or entity that has a financial stake in the outcome of the claim at issue.

Generally, in a Chapter 7 bankruptcy case, the Chapter 7 trustee will object to proofs of claim. But a Chapter 7 debtor might need to object to a claim, too. A Chapter 7 debtor will do so if the existing claims, as they stand, will cause the debtor to lose more property than necessary or cause the debtor to owe more than the debtor should after the closure of the bankruptcy case. This will usually happen only if an issue exists with a nondischargeable priority claim, such as taxes or a domestic support obligation.

Additionally, the majority of bankruptcy courts have held that a Chapter 7 debtor can object to claims if he or she shows:

  • the debtor had a financial interest in the result because there is likely to be money left over once all claims are paid (this is rare in a Chapter 7 case)
  • the trustee unjustifiably failed or refused to object to the claim or claims in question, or
  • the debt owed by the debtor is not dischargeable.

The objecting party has the burden of presenting sufficient evidence that demonstrates the creditor’s claim should not be allowed. If the objecting party produces such evidence, the burden of proof shifts back to the creditor to prove their claim.

Who Can Object to a Chapter 13 Bankruptcy Claim?

As above, any party in interest may object to a claim in a Chapter 13 bankruptcy case.

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