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Filing a Proof of Claim in a Chapter 11 Bankruptcy: A Critical Step for Protecting Creditors’ Rights

When a business files for bankruptcy under Chapter 11 in South Florida, it is up to the business’s creditors to protect their right to payment. If a creditor does nothing, it can lose its ability to participate in the bankruptcy process—and it can potentially lose its ability to collect any of the amounts it is owed. In most cases, the first step toward protecting a creditor’s right to payment is to work with a Miami creditors’ rights attorney to file a Proof of Claim.

What is a Proof of Claim?

A Proof of Claim is a formal filing that preserves a creditor’s ability to participate in the Chapter 11 bankruptcy process. Filing a Proof of Claim is a critical first step for protecting creditors’ rights, and it is a step that will often need to be taken in conjunction with other steps based on the debtor’s filing.

The Proof of Claim is a standardized filing, and creditors seeking to protect their rights must generally use Official Form 410. Preparing Official Form 410 requires information including (but not limited to):

  • The creditor’s current name and any previous names it has used with the debtor
  • The amount of the creditor’s claim against the debtor
  • Whether the claim includes interest or other charges (in which case the creditor must itemize any interest fees, expenses and other charges owed)
  • Whether the creditor acquired its claim from another party
  • The basis for the claim (i.e., for goods sold, services performed, leasing or lending)
  • Whether all or part of the claim is secured
  • Whether the claim is subject to a right of setoff

Along with filing Official Form 410, creditors may need to file various attachments, supplements and other forms of supporting documentation as well. Some of the more common examples include:

  • Attachment A (Mortgage Proof of Claim Attachment)
  • Supplement 1 (Notice of Mortgage Payment Change)
  • Supplement 2 (Notice of Postpetition Mortgage Fees, Expenses and Charges)
  • Mortgages or Promissory Notes
  • Invoices or Itemized Statements of Running Accounts
  • Security Agreements and Other Contracts
  • Judgments Against the Debtor

As stated on Official Form 410, creditors must “leave out or redact information that is entitled to privacy on [the] form or on any attached documents.” As also stated on Official Form 410, filing a fraudulent claim can subject individuals to up to a $500,000 fine and five years of imprisonment under federal law. This makes it critical for creditors to ensure that they prepare their Proof of Claim forms accurately, and this is one of several reasons why it is important to engage an experienced Miami creditors’ rights attorney to provide advice and representation from the earliest stages of a client’s or customer’s Chapter 11 filing.  

What is the Deadline for Filing a Proof of Claim in a Chapter 11 Bankruptcy Case?

The deadline for filing a Proof of Claim in a Chapter 11 bankruptcy case depends on the jurisdiction in which the debtor chooses to file. In the U.S. Bankruptcy Court for the Southern District of Florida, Local Rule 3003-1 provides:

“Unless otherwise ordered by the court . . . the deadline for filing a proof of claim or interest required by Bankruptcy Rule 3003(c)(2) shall be 70 days after entry of the order for relief, or in a dismissed case, 70 days after entry of the order reinstating [the] case.”

Bankruptcy Rule 3003(c)(2) applies to any creditor “whose claim or interest is not scheduled—or is scheduled as disputed, contingent, or unliquidated” in the debtor’s bankruptcy filing. However, Bankruptcy Rule 3003(c)(1) makes clear that any creditor may file a claim regardless of whether its claim is scheduled.

But, even though creditors may not be required to file a Proof of Claim immediately (or at all in some cases), there are several important reasons to consider filing as soon as possible. To protect their rights, creditors will often need to play an active role in the Chapter 11 bankruptcy process. The longer a creditor waits to get involved, the fewer options it may have—and the more difficult it may become to protect the creditor’s right to payment as a result.

What Happens After You File a Proof of Claim?

As noted above, once a creditor appropriately and timely files a Proof of Claim, the creditor has the right to participate in the debtor’s Chapter 11 bankruptcy proceeding. From this point forward, the specific steps involved will depend on the specific type of filing the debtor submitted (i.e., whether the debtor submitted a traditional Chapter 11 filing or a small business filing under Subchapter V) and the other steps the debtor takes during the bankruptcy process (i.e., filing various “first day motions” to secure judicial approvals).

In some cases, debtors may challenge creditors’ Proof of Claim filings as well. These challenges may seek to invalidate creditors’ claims in their entirety, dispute the amount owed or the nature of the debt (i.e., as secured or unsecured), or raise technical issues that creditors must address before they can take further action. When facing these types of challenges, creditors must respond both promptly and effectively, as failing to do so could potentially impair their ability to protect their rights.

Finally, while filing a Proof of Claim is a critical step for many creditors, it is just the first step in the process. As the Chapter 11 bankruptcy process moves forward, creditors must continue to work closely with their legal counsel to assess their options, submit all necessary filings, and take all other necessary steps for preserving their claims to the fullest extent possible.

Schedule a Consultation with a Miami Creditors’ Rights Attorney at Edelboim Lieberman

Do you need to know more about filing a Proof of Claim in a Chapter 11 bankruptcy case in South Florida? If so, we invite you to get in touch. To schedule a consultation with a Miami creditors’ rights attorney at Edelboim Lieberman, please call 305-768-9909 or contact us online today.

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