A proof of claim is a document filed by a creditor for the right to payment as against the bankruptcy estate. Proofs of claims can be filed by a wide variety of creditors such as general unsecured creditors (credit cards, pay day loans, medical bills, etc), priority creditors (IRS and Franchise Tax Board), and secured creditors (mortgage companies, car lenders, etc.). The proof of claim is filed with the bankruptcy court either in person, by mail or can even be filed on line. Blank claim forms are available on all bankruptcy court websites. The claim form sets forth the approximate amount that the creditor believes is owed, the classification of the claim (secured, priority, or general unsecured) and then the appropriate documentation giving rise to the claim is attached. In Chapter 13, a creditor must file a proof of claim to participate in the process and the court sets a deadline. Once filed, a proof of claim can be amended at any point in time.

Note that once a claim is filed, the debtor has the opportunity to review and object to the claim. Sometimes there are grounds to dispute the amount of the claim or the priority of the claim. Creditors sometimes misclassify a claim as priority when in fact it should be a general unsecured claim. Other times secured creditors may list the amount of arrears on a secured claim and the debtor may want to dispute the amount. To object to a claim a motion must be filed with the court and the creditor will have the opportunity to amend the claim or can oppose the objection and request a hearing. If a hearing is requested, the matter becomes contested and the court will hold status conference and could set the matter for trial. A bankruptcy judge can hold an evidentiary hearing on the matter. Each party can present their evidence and argument on the issues and the judge will make certain findings of fact and conclusions of law.

As a comparison, in Chapter 7, a creditor does not necessarily always file a claim. The bankruptcy trustee makes a determination if there may be a distribution to creditors. Once that determination is made, the court sends out a notice to file claims. From a creditor’s perspective, a creditor should always file a claim in Chapter 13 but not necessarily in Chapter 7.

David Arietta has the experience to review and object to claims. He can advise clients what it entails and whether an objection is warranted or cost effective as part of the Chapter 13 process. Call him at (925) 472-8000 for a review of your situation.

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