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Secured creditors must file proofs of claim on time

On Behalf of | Jul 6, 2017 | Bankruptcy

In Virginia bankruptcy cases and elsewhere, secured creditors are not required to file proofs of claim as unsecured creditors are. Nonetheless, a recent case set a precedent that if they do file a proof of claim to receive payments out of a Chapter 13 bankruptcy case, secured creditors must file it on time.

The case was heard in a U.S. Bankruptcy court in which a couple was giving the judge details of their plans to pay off their debt over the next three to five years. A secured creditor, a company that had a lien on the couple’s home for unpaid property taxes, wanted to receive payments from the bankruptcy plan. The judge asked the couple if they wanted to file a claim for the creditor, but they declined. Because the creditor had not filed a claim, the couple stated that they would wait until later to pay the taxes.

The company decided to file a motion petitioning the court to allow it to file its proof of claim late. The court was able to show that the company was aware of the deadline to file proofs of claim, and that it had not filed the claim in time. According to the court, even though secured creditors like the company are not required to file claims, if they want to receive payments from the bankruptcy, then they must file claims on time.

People who are considering Chapter 13 bankruptcy due to credit card debt may want to discuss their concerns with a lawyer who focuses on bankruptcy. An attorney could possibly assist a client by explaining the steps involved in bankruptcy and paying creditors back as well as aiding clients in bankruptcy court.