Bankruptcy proof of debts

3 key takeaways

• Proof of debts is a formal claim filed by creditors to confirm the amount owed by the debtor.
• Creditors must provide supporting documentation to substantiate their claims.
• The bankruptcy trustee reviews these claims to determine their validity and priority.

What is proof of debts in bankruptcy?

Proof of debts, also known as proof of claim, is a formal document that creditors file with the bankruptcy court to assert their right to receive payment from the bankruptcy estate. This document includes details about the debt, such as the amount owed, the basis for the claim, and any supporting documentation. Filing a proof of claim ensures that creditors are included in the distribution of the debtor’s assets.

In bankruptcy cases, especially Chapter 7 and Chapter 13, submitting a proof of claim is essential for creditors to be considered for repayment. The bankruptcy trustee reviews these claims to determine their validity and prioritize payments based on the type of debt and available assets.

How to file a proof of claim

1. Obtain the proof of claim form: Creditors can obtain the official proof of claim form (Form B410) from the bankruptcy court or download it from the court’s website.
2. Complete the form: Fill out the form with accurate information about the debt, including:

• Creditor’s name and contact information.
• Amount of the claim.
• Basis for the claim (e.g., loan, credit card debt, medical bill).
• Any supporting documentation (e.g., contracts, invoices, statements).

1. Attach supporting documents: Include copies of any documents that substantiate the claim, such as loan agreements, promissory notes, or invoices.
2. File the form with the court: Submit the completed form and supporting documents to the bankruptcy court by the deadline specified in the bankruptcy notice. Filing can usually be done electronically, by mail, or in person, depending on the court’s procedures.
3. Serve copies: In some cases, creditors may need to serve copies of the proof of claim to the bankruptcy trustee and the debtor’s attorney.

Important considerations for filing a proof of claim

• Deadline: Creditors must file their proof of claim by the deadline set by the bankruptcy court, known as the “bar date.” Late claims may be disallowed.
• Accuracy: Ensure that all information provided is accurate and complete to avoid disputes or disallowance of the claim.
• Priority: Indicate if the claim is secured, unsecured, or has priority status (e.g., taxes, child support).

Real-world application

Example: ABC Supplies, a company that provided goods to a now-bankrupt retail store, wants to recover the money owed.

Filing the proof of claim: ABC Supplies obtains Form B410 from the bankruptcy court’s website. They complete the form, indicating the amount owed ($10,000) and the basis for the claim (goods supplied). They attach copies of invoices and delivery receipts as supporting documentation.

Submitting the claim: ABC Supplies files the completed proof of claim form and supporting documents with the bankruptcy court before the bar date. They also send copies to the bankruptcy trustee and the debtor’s attorney.

Outcome: The bankruptcy trustee reviews the claim, verifies its validity, and includes it in the list of creditors eligible for payment from the bankruptcy estate. ABC Supplies may receive a portion of the owed amount, depending on the available assets and the priority of their claim.