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What Happens If I Miss The Bar Date in a Bankruptcy?
By Michael C. Dennis, MBA, CBF

One of my consulting clients called me about a fairly unique problem. The company filed a Proof of Claim in a bankruptcy, but the claim was disallowed. The debtor objected to the Proof of Claim because it was submitted after the Bar Date without a valid legal reason for the late filing.

Two definitions are required at this point. Individuals and companies who have pre-petition claims against a bankrupt debtor must file a Proof of Claim form with the Bankruptcy Court. The Proof of Claim form tells the bankruptcy court how much the debtor owed a particular creditor at the time the bankruptcy filing and the type of claim the creditor is submitting [such as secured or unsecured. The Bar Date is the generally the last date that a Proof of Claim can be filed in a bankruptcy without risk of penalty.

The question I was asked was this: Are there valid legal reasons for failing to file by the Bar Date. In this case, the company received no notices from the debtor or the bankruptcy court. They were never informed of the Bar Date, and never received a Proof of Claim form.

My comments were as follows:

First, I am not a lawyer... so the information I am about to present is accurate to the best of my knowledge...and since this is not a formal consulting arrangement meaning that I am not being paid for this information I might warn you that the advice may be worth every penny you are paying me for it...

As a general rule, a late-filed claim can be allowed if there was no actual or constructive notice. The problem a creditor often faces is that the bankruptcy judges are pro-debtor, particularly on this type of procedural issue. Since bar dates are usually set many months after the bankruptcy filing, the question often asked is: "How could you not know that someone who owes you money filed bankruptcy?"

As I understand it, constructive notice of the bankruptcy filing is all the court needs to find to deny a creditor the right to file a late claim. I strongly urged my client contact a lawyer in the city in which the bankruptcy was filed to determine their rights and options.

If there is one lesson to be learned from this situation, it is that creditors cannot wait for the debtor to take action. If they are aware of a bankruptcy filing but have not received notice, they should contact the debtor, confirm their debt is listed on the schedules of assets and liabilities filed with the Court, ask about the Bar Date, and file their Proof of Claim sooner rather than later.

Reprinted with permission from the Covering Credit Newsletter 9/25/02 Edition
© 2001 All Rights Reserved

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