The Most Common Problem Associated
With Filing a Proof of Claim in a Chapter 11 Bankruptcy
By Steven Kozack.

Question: One reader asked: What is the most common problem associated with filing a proof of claim in a Chapter 11 bankruptcy?

Answer. I believe the most serious problem involves failing to file a proof of claim by the Bar Date. Filing of a proof of claim is essential to preserving the right of the holder of the claim to participate in any dividend distribution from the bankruptcy estate. In a chapter 11 case, if the debtor schedules the creditor's claim other than as unliquidated, contingent or disputed, the claim is deemed filed by the creditor in the amount of the scheduled claim. However, if the claim is scheduled as contingent, unliquidated, or disputed, the creditor must file a proof of claim.

As a practical matter, most creditors should file a proof of claim immediately upon receiving notice of the bankruptcy.

One of the more common problems involves the creditor providing insufficient documentation from which the validity of the claim can be determined. This usually results from a failure to attach copies of documents evidencing the claim and/or the security interest to the proof of claim when it is filed.

However, the most embarrassing mistake that can be made by a creditor remains failing to file a proof of claim at all, or failing to file before the Bar Date. In this scenario, there is little that the credit manager / credit department can offer to try to justify this oversight. Unfortunately, the fact that a claim was not filed before the bar date may limit [or in some instances prevent] the creditor company from receiving a payout under the debtor's Plan of Reorganization.

Thanks for asking!! Steven Kozack

Reprinted with permission from the Covering Credit Newsletter 02/07/03 Edition © 2003 All Rights Reserved