New Requirements & Deadlines for Proofs of Claim
On December 1, 2017, amendments to the Federal Rules of Bankruptcy Procedures became effective and creditors now face new deadlines and changes to the proof of claim rules. The amendments affect both secured and unsecured creditors.
Rule 3002 now requires a secured creditor to file a proof of claim to be entitled to distribution from the bankruptcy estate. The Rule clarifies, however, that a proof of claim is not required to preserve the secured creditor’s lien. The lien can “ride through” the bankruptcy canewse unaffected despite the lack of participation by the secured creditor.
Word of Caution: a creditor’s lien is subject to being primed, discharged, or avoided in a motion or plan. The Bankruptcy Court may also order that the lien attach to the proceeds of a sale of collateral. Thus, it is prudent to monitor the case to prevent an adverse disposition of a lien.
Rule 3002 also changes the deadlines (known as “bar dates”) for filing proofs of claim. In cases under chapter 7 (liquidation for entities and individuals), chapter 12 (reorganization for family farmers or fishermen) and chapter 13 (individual payment plan), creditors will now have only seventy (70) days from the date that the bankruptcy petition is filed to file a proof of claim—whereas before, the date was set after the first creditors’ meeting and was ninety (90) days or longer when proofs of claim were to be filed.
A creditor is not required to file a proof of claim if the bankruptcy trustee determines that there are insufficient assets to make a distribution. If the trustee, however, subsequently provides notice of sufficient assets to make a distribution, then the deadline to file a claim is ninety (90) days from the date of that notice. Additionally, if a creditor receives insufficient notice of the proof of claim deadline, the creditor can file a motion for additional time to file a proof of claim.
Remember that creditors should be alert to these changes and vigilant in monitoring cases—even if it ultimately decides to not file a proof of claim.