Friday, September 22, 2006

Filing Proofs of Claim in a Chapter 11 Bankruptcy Case

Procedures to File a Proof of Claim

Many attorneys who miss the bar date to file proofs of claim in a Chapter 7 or Chapter 11 bankruptcy often find themselves subject to claims for malpractice. In the context of a Chapter 11 case, if a creditor's claim is not timely filed then that creditor will not be able to collect on any of the monies due. The purpose of this e-mail is to review the proper procedures for filing a proof of claim in a Chapter 11 bankruptcy case.

1. Section 1111(a) of the Bankruptcy Code provides that a proof of claim is deemed "filed" for any claim that appears in the Schedules except if it is listed as disputed, contingent or un-liquidated. Therefore, to know whether to file a proof of claim, an unsecured creditor must examine the Debtor's bankruptcy schedules to determine how their client's claim was scheduled, i.e., whether it was listed as disputed, contingent or un-liquidated.

Therefore, unless a creditor's attorney or a creditor can obtain the schedules by going to court or through PACER, the better practice is to file a proof of claim as soon as possible in a bankruptcy case. In fact, the best procedure may be to file a notice of appearance and a proof of claim as soon as an attorney is retained to represent a creditor in a Chapter 11 case. If an attorney or a creditor does not file a proof of claim early in a case, then they must file the proof of claim when a bar date is set in a Chapter 11 case. The bar date is a date set by a Judge in a bankruptcy case which provides a firm or a fixed date by which proofs of claim must be filed. If the proof of claim is not filed by the bar date, then that creditor is barred from receiving a distribution in the case, unless of course the creditor was listed in the Debtor's Chapter 11 schedules as not having a claim that's disputed, contingent or un-liquidated.

2. When preparing the proof of claim, a question that is often asked is, "Is it necessary for the client to sign the proof of claim, or can the attorney for the creditor sign it?" In re Roberts, 20 B.R. 914 (E.D.N.Y. Bankruptcy 1982) holds that an attorney can sign a proof of claim on behalf of a client. This author, however, believes that the better procedure is to have the client sign the proof of claim. Once the proof of claim is signed and backup is attached to the proof of claim, the proof of claim should be mailed by Federal Express or overnight delivery to the bankruptcy court with a short letter of direction requesting that the clerk file the proof of claim. Remember to always send two copies of the proof of claim and a stamped self-addressed envelope and request that the Clerk file the original proof of claim, time stamp the copy of the proof of claim and return the copy to the attorney for the creditor so the creditor has proof of filing. By sending the proof of claim by Federal Express or other overnight courier service, the creditor or the attorney for the creditor can track the package to ensure that it was received by the court.

3. Always calendar the filing of the proof of claim so you can monitor whether the Court sends you back the filed proof of claim in the self-addressed stamped envelope to avoid a malpractice claim in the case.

4. This author's rule is that if the proof of claim is sent to the court and the copy and the self-addressed stamped envelope is not returned to the author within one week to ten days of the filing of the claim, the proper procedure is to call the court and talk with the clerk to determine if the claim was received by the court and if so, why it was not returned, and if was not received, to Federal Express another claim to ensure that it is received by the court.

5. Also, at the bottom of the claim, it is advisable to add language that indicates "Creditor reserves the right to further amend or modify this claim." That language may be helpful if the creditor discovers new information and desires to modify the amount of its proof of claim.

6. Always attach backup to the proof of claim, which will evidence the amount of the claim, invoices, a spreadsheet or collateral for the claim if the claim is secured, such as a mortgage.

7. The filing of the proof of claim should be done on the official Form 10, which can be obtained from the Bankruptcy Court's website. If the case is a megacase, and the Debtor's counsel has created a proof of claim for use in that case, it's preferable to use the proof of claim prepared by counsel for the Debtor.

Jim Shenwick

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