Will County Bankruptcy Attorney Explains Chapter 13 Proof of Claims

All creditors will receive a bankruptcy notice.  We are estimating, in our petition, the amount of the mortgage arrears.  We have no idea what the mortgage arrears really are because obviously, we are not the mortgage company’s law firm or the mortgage company.  The same thing applies with the car.  We are putting an approximate dollar amount as to what we think they owe.

What happens is, when the creditors get notice of the bankruptcy, it is just like Chapter 7.  It happens about 7 to 10 days after filing.  The clerk of the court will send an official notice.  What happens is creditors then file what’s known as a Proof of Claim.  The Proof of Claim is then sent to the court with the case number indicated and that’s what that creditor believes it is entitled to from that debtor or what is owed.  If it is a medical bill or a personal loan or a miscellaneous unsecured creditor, there is no issue.  The Proof of Claim gets filed and that is the amount that they are going to be entitled to whether it’s 10% or 100%, we don’t know yet.  But that amount is not really disputed.  So when you file a Proof of Claim for a doctor or something that somebody owed, they probably never disputed your claim.  Whatever it was, it was.

The problem with autos and mortgages is that in every single case where there is a mortgage, the Proof of Claim that they file has to match what we put down.  And obviously it doesn’t because we are putting the number first.  So I am saying $10,000 the mortgage company is owed when in reality, it’s $10,500.  Instead of just allowing the claim for $10,500 to be part of the case without any kind of incident, the mortgage company has to file an Objection to Confirmation.  Now all they really want is the number corrected.  What used to happen is the mortgage company would file their Proof of Claim and as long as the plan was going to work and there was enough money to get them paid in 60 months, their claim stood and they got paid.  Now, it’s the number that we put down in the plan that is the one that actually governs how much the secured creditors actually get.  So our first opening salvo is an estimate.  We can never know the exact amount; however, it’s got to be to the penny. 

So in every single case with a mortgage, first and/or second, we are going to get an Objection to Confirmation and unfortunately, our client gets it, too.  Why are they objecting?  They don’t want my case to go through?  What’s going on here?  Now, calm down, calm down.  We just have to make sure that the amount that you owe them is exactly the amount that is in the plan so we have to amend it.  You see how it makes the lawyers look bad?  Because you’re constantly getting an objection and you constantly have to amend the plan to provide the right number.

We have an employee that primarily works on Chapter 13′s and that’s what she does.  She amends the plans; she satisfies the trustees’ additional requests.  So that’s how it works for a mortgage.  So any mortgage, you’re going to get an objection.  If they are careless and do not object, which almost never happens, whatever number we put down, if the debtor can complete their case, that’s the total amount paid.

For more articles on Chapter 13, visit Will County Bankruptcy Attorney or call (847) 520-8100.