Chapter 11 bankruptcy is a series of complex procedures that should be handled with the utmost care and attention to detail. For creditors pursuing recovery of unpaid invoices, loans, bills, or other outstanding debts, it is highly recommended to seek legal counsel from an experienced bankruptcy attorney to represent your claim correctly and assist you throughout the process – from the first step of filing a Proof of Claim to approving the Debtor’s Plan and receiving restitution.
Filing a Proof of Claim can be confusing for many creditors, as well as time-consuming. It is easy to make a mistake that can misrepresent your bankruptcy claim and rescind your right to payment.
While it may seem ridiculous, you would be surprised at how many Proof of Claim forms are deemed invalid or worse, fraudulent, because of easily avoidable mistakes. The necessary steps must be taken to ensure your claim is filed accurately, especially because fraudulent claims are subject to a $500,000 fine, 5 years in prison or both.
Illustrated below is a quick cheat-sheet to make sure you take the proper steps to file your Proof of Claim accurately.
Outlined below in greater detail are the 5 most common mistakes to avoid when filing a Proof of Claim.
1. Mixing up the Debtor and Creditor fields on the form.
Having a clear understanding of not only the Chapter 11 process, but the key terminology and language is important before taking action. This will allow you to avoid confusing the Debtor and creditor fields on your Proof of Claim form.
It is not uncommon for creditors to switch these two labels. Remember, the Debtor is the corporation or entity filing for Chapter 11 bankruptcy. The creditor is the individual or company that reserves the right to receive payment from the Debtor’s bankruptcy estate based on events taking place prior to the Petition Date.
Mixing up the Debtor and creditor fields can lead to your Proof of Claim being disallowed with no second chance.
2. Filling in the incorrect case number.
Each Chapter 11 bankruptcy case is assigned a specific case number. Creditors must enter the correct case number when filing a Proof of Claim and triple check for accuracy. Filling out the wrong case number is a common mistake that can lead to claims disallowance or fraud assumption, if the case number you’ve entered correlates to another Chapter 11 case.
For more complex cases, more than one case number may be assigned. This occurs if a larger organization consisting of a parent company and multiple subsidiaries files for bankruptcy. In this instance, a primary “lead case” number will be administered for the entirety of the case, while individually explicit case numbers will be assigned to each of the co-Debtors’ cases.
Whether you are involved in a smaller case or larger, more complex case, it is imperative to first determine the manner in which your claim is listed in the Debtor’s Schedules of Liabilities so that you can include the correct case number in your Proof of Claim.
3. Failing to sign the Proof of Claim.
Another common mistake that creditors make is failing to sign and date the Official Form 410 (also referred to as Official Form B 410). The individual completing the Proof of Claim is required to submit an original signature when physically mailing the forms.
Creditors have the option of filing an electronic Proof of Claim. Under these circumstances, the bankruptcy court is authorized to accept electronic signatures.
Your signature declares under penalty of perjury that the details provided are true and accurate, which makes it especially important that you take the time to ensure you’ve filled the form correctly before signing.
4. Mistakenly submitting original copies of supporting documentation.
Proof of Claim forms should include supporting documentation to substantiate your bankruptcy claim and the amount of your claim value. However, it is critical to only submit copies of these documents, and not the originals. Any evidence submitted with your Proof of Claim will likely not be returned.
5. Missing the Bar Date.
The Bar Date is the deadline for creditors to submit their Proof of Claim forms and any supporting documentation in order for it to be accepted by the bankruptcy court. Late Proof of Claims are rejected by the court without any second chances. Only under rare, extenuating circumstances are claims filed after the Bar Date accepted.
Failing to file your bankruptcy claim by the Bar Date is a frequent mistake made by creditors and should be avoided to ensure you’re able to assert your right to receiving restitution. It is recommended to submit your Proof of Claim with plenty of time before the deadline.
If you’ve received a Notice of Bankruptcy, be sure to proceed with care and mindful consideration so you can avoid any proof of claim mistakes. It is imperative that you take the correct initial steps to preserve your right to receiving payment.