A Brief Overview of the Chapter 7 and Chapter 13 Claims Process

Most individuals who are considering filing for bankruptcy will qualify for either Chapter 7 or Chapter 13 bankruptcy. The major difference between these two types of bankruptcy is that one is essentially a liquidation while the other creates a payment plan that your creditors must follow over a period of 3 to 5 years.

In both types of bankruptcy, having accurate information regarding your debts is extremely important. Your schedules and proofs of claim will help ensure accuracy for an orderly administration of the estate.

Scheduling Debts and Proofs of Claim

When you file for bankruptcy, you schedule out all of your debts and obligations to third parties and file those with the court. These schedules indicate either what the trustee will pay on your behalf in a liquidation or how you will determine your payment plan in a Chapter 13 bankruptcy.

While it is important to be as accurate as possible in your schedules, creditors also have an obligation to review your information and ensure that their claims are accurately listed. If they are incorrect, a creditor can file a “proof of claim” to indicate how much they believe the debt should actually be.

Lenders are not obligated to file a proof of claim if the scheduled debt is correct, but it is a good idea to submit a proof of claim to ensure the accuracy of the repayment plan or liquidation amount. It is also important to note that proofs of claim are presumed accurate unless someone disputes them.

Chapter 7 Proofs of Claim

Some Chapter 7 cases will be “no asset” cases. In those situations, there are no assets that are considered “nonexempt” that could be distributed to creditors. These cases are especially common for individuals. In those circumstances, lenders are not required to file a proof of claim at all, even if the scheduled asset is inaccurate. This is because creditors are not expected to obtain a payment at all in these types of cases. Nonetheless, they still have the option to file a proof of claim if they so desire.

In Chapter 7 cases that involve assets, however, creditors should file proofs of claim to ensure that they receive the full amount of payment for their debt, or at least the right portion of it.

Chapter 13 Proofs of Claim

In Chapter 13 cases, filing a proof of claim involves the same process as in a Chapter 7 case. However, submitting a proof of claim in Chapter 13 cases is perhaps more important because creditors usually have a better chance of obtaining full or partial payments in these cases over time.

Having accurate information, including the exact amount of particular debts is essential to the bankruptcy process. Proofs of claim help ensure accuracy. If you have questions about proofs of claim or the bankruptcy process, our team can address your concerns. Contact us for more information by calling 248-246-1166.