Chapter 13 bankruptcy is a very useful debt relief option for consumers who are struggling financially. By filing for Chapter 13 bankruptcy, you can become current on your debts while protecting your most important assets. Chapter 13 bankruptcy requires you to pay back a portion of your debts through a 3 to 5 year repayment plan. The bankruptcy Trustee handling your case distributes these payments to your creditors.
However, there are certain steps you must take to file your case. For instance, you must provide a list of your creditors and debts when you file for Chapter 13 bankruptcy. Your creditors may also provide documentation on your debts, specifically how much you owe, within a certain timeframe. This is called a “proof of claim”, a legal document creditors submit to the bankruptcy court.
Filing a Proof of Claim for Unsecured Debts
There are several possible outcomes if a creditor fails to file a proof of claim. In some cases, you could benefit, and may not have to pay back an unsecured debt. These are debts that can include credit cards, store cards (think Best Buy cards), medical bills and utility bills.
Filing a Proof of Claim for Secured Debts
On the other hand, a secured debt could include a home or a car. Secured debts are backed by something that is tangible. If your creditor fails to file a proof of claim for a secured debt, then it may be in your best interest to file a claim on their behalf. Should you fail to file a claim, the Trustee would not make payments to the creditor. This means that you could still owe the debt (including interest and fees) by the time your Chapter 13 bankruptcy case concludes.
Filing a Proof of Claim for Nondischargeable Debts
You may also have nondischargeable debts, which can include spousal or child support. It is in your best interest to file a proof of claim for these, or you could still owe these debts and any related fees after your bankruptcy case is over. You can include payments on nondischargeable debts in your repayment plan.
How Do Creditors Know to File a Proof of Claim?
Your known creditors receive notification when you file for Chapter 13 bankruptcy. These are the creditors you list when you file your case. Once the meeting of creditors takes place, your creditors have 90 days to file a proof of claim specifying your debts and the amounts owed. Government entities have 180 days.
There are cases where one or more creditors fails to meet the deadline. Should this occur, the bankruptcy Trustee handling your case will inform you of which creditors failed to file a proof of claim. However, creditors that never file a claim will not receive any payments through your Chapter 13 repayment plan. This can complicate your finances after your bankruptcy concludes. Fortunately, an experienced bankruptcy attorney has likely handled this situation before and can help you resolve any issues with your creditors.
Also keep in mind that you do not have to do anything if a creditor fails to file a claim for an unsecured debt. Your unsecured debt is forgiven when your bankruptcy case successfully concludes, regardless of whether the creditor filed a claim.
Can I Contest a Proof of Claim?
You can contest a proof of claim if you have reason to believe the claim is incorrect. If you want to challenge a claim, then your attorney can help guide you through the process. The exact requirements for contesting a claim can vary, so it helps to have an attorney with experience handling Chapter 13 bankruptcy cases. Your attorney may need to represent you during a hearing.
Contact Us With Any Questions About Chapter 13 Bankruptcy
The Sader Law Firm has extensive experience with consumer and business bankruptcy cases. You may contact us for a consultation if you have questions about filing a Chapter 13 bankruptcy petition. We also offer $0 up-front filing options for Chapter 13 bankruptcy. Call us at (816) 281-6349 or use our online contact form to learn more about these options.