Before a creditor can collect from a debtor who has filed bankruptcy, the creditor must file a claim in bankruptcy court. Generally, after the debtor files he or she provides a schedule with the petition, listing all creditors and the amounts due to those creditors. If the debtor omits a certain creditor, the amount owed will not be discharged in the bankruptcy.
After the debtor provides a schedule of debts, the court sends a proof of claim form to all listed creditors. Generally the creditors attend a “341 meeting” where they either accept or dispute the amount the debtor listed. All chapter 7 and 13 debtors must return the proof of claim form within 90 days of the 341 meeting. On the other hand, chapter 11 creditors only need to return if they object to the amount or how they are classified by the debtor.
If the trustee or debtor in possession agrees with the claimed amount, the creditor has a claim in that amount. If the trustee disagrees, he brings a contested matter before the court to determine the proper amount of the claim. Once all claim amounts are determined, the creditors are paid based on secured status and priority.
Many courts are split on when the actual claim arises or becomes legal right to sue for the debt. However, most courts use either the “relationship” test or the “fair contemplation” test. The relationship test provides a claim only arises when there is a pre-petition relationship between the parties and the conduct giving rise to liability occurs pre-petition. Conversely, the fair contemplation test provides that a claim arises when an individual is exposed prepetition conduct or a product that gives rise to an injury.
Nevertheless, the claims process is fairly straight forward if the debtor complies with all the requirements for filing bankruptcy. However, it is still a good idea to consult with an attorney if you are considering bankruptcy or if you have already filed but are unsure of the claims against you. If need help with your schedule of claims, call Lanigan and Lanigan in Winter Park, Florida. Eric Lanigan and Roddy Lanigan attorneys have more than 36 years experience in bankruptcy and will make sure your creditors play by the rules.