Kentucky Bankruptcy Law

Counsel with Care

Say it, claim it – Chapter 13

Claims play a major role in Chapter 13 bankruptcies. They are essentially superfluous in a “no-asset” Chapter 7 so they are often not filed in such cases except for certain secured creditors. If there are non-exempt assets that will be liquidated (reduced to a monetary value by being sold) in a Chapter 7, then it is an “asset” Chapter 7 and claims serve a similar function as I’ll describe for the Chapter 13.

In a Chapter 13, a plan is proposed by the Debtor that spells out what the Debtor will pay in over time. The plan also describes how various creditors will be treated.  The categories of creditors typically include unsecured, priority unsecured (such as recent tax debt), administrative costs (such as attorney fees), and secured debt. Each category receives different treatment.

For a creditor to actually receive what is owed to them per the plan’s provisions, they must file a claim. There is a form available just for this purpose and the creditor can either send it in to the court clerk to be electronically filed or, if they have set up an account, they can file it electronically. The claims for most creditors (other than governmental agencies) must be filed by a deadline specified in the Notice that is sent out to all creditors when a bankruptcy is filed. If they miss the deadline, their claim will likely be denied and the full debt discharged (depending on the category of debt) as to the Debtor.

The claim also puts the Debtor on notice of any additional fees and penalties that the creditor may be entitled to receive under the loan contract or by law. It is up to the Debtor to review the claims and object to anything that is erroneous or to excessive fees. If a plan proposes to pay even unsecured debts at 100% of the claim, then it is even more important to scrutinize the claims and object to them if they are wrong. This could reduce the overall plan payment. However, there are hefty penalties to filing false claims so most of the ones I review are accurate.

May 2, 2013 Posted by | attorney fees, Bankruptcy, Chapter 13, Discharge, Proof of Claim | , , , , , , , , , , , | Leave a comment