I was invited by the American Bankruptcy Institute to speak on Chapter 13 issues at the ABI Consumer Bankruptcy Conference in Chicago. A big issue: the effect we are seeing from having shortened the time within which creditors must file proofs of claim in bankruptcy cases.
The rule used to allow 90 days after the first date set for the meeting of creditors within which to file claims. Under the new rule, these proofs of claim must be filed within 70 days after the petition date.
This shortening of time has resulted in creditors around the country filing their claims late. It has been a serious problem for creditor attorneys who do not work in bankruptcy all the time and who may not keep fully abreast of changes in rules like this.
In order to share in any distributions or receive any payment on the debt owed it, a creditor must file a proof of claim. The timelines within which that claim must be filed are strictly enforced. Failure to file a claim timely means that the claim will not be paid or will be paid only after all other claims are paid in full.
“So what can a creditor do if it has missed the bar date?”
A creditor’s lawyer friend of mine called me with this question. His client had missed the deadline and as a result would receive no payments under a Chapter 13 plan.
My advice was to contact the debtor’s counsel and propose to pay the debtor a reasonable sum in return for the debtor filing a claim on behalf of the creditor. Bankruptcy Rule 3004 allows the debtor to file a proof of claim on behalf of a creditor who has not filed. The debtor has that right for 30 days after the bar date.
Fortunately, the 30 days had not yet run when my friend contacted me. He was able to reach an agreement with the debtor and get his client’s claim filed by this alternative method.
Do not count on this strategy working for you. Instead, make sure all claims are filed timely.
Debtor’s counsel should also be aware of the bar date. There often are instances in which the debtor very much wants to see that a claim is filed on behalf of a creditor. For example, if a debtor has student loans, the debtor will want to see the student loan creditor filing claims. The student loan debt is not dischargeable in bankruptcy, so the debtor wants to see as much of it paid as possible.
Another example might be if the debtor owes money to relatives or friends. The debtor will want such persons to share in the distributions as much as possible.
Have you or your clients experienced difficulty with the new rule? We’d like to hear from you.