chance of a revised bankruptcy bill being presented to President Bush
for signature before year-end was put to rest when one of our fine
representatives added at the last minute an abortion funding rider to
the legislation. It is unlikely that this session of Congress will
make any further attempt to bring revised legislation to the President
before the current session ends.
It is safe to bet there will be no decrease in the growing number
of bankruptcy filings as we enter into 2003.
Many credit professionals upon receiving notice of bankruptcy are
faced with the dilemma of whether they should file a proof of claim.
In every business bankruptcy case where assets are available for
distribution there is a deadline for filing proofs of claim. In legal
parlance this is referred to as the “bar date”. The bankruptcy
code has a section that deals with the filing of proofs of claim (§501
& §502). In Chapter 7 (liquidation) the proof of claim is to be
filed within with the Bankruptcy Court no later than ninety days after
the first meeting of creditors (341 meeting).
In Chapter 11, if the bankrupt has not listed the creditors claim,
listed it incorrectly, listed it as disputed or contingent then the
creditor must file a proof of claim if they want to participate in any
distribution of assets from the bankruptcy. If the bankrupt has listed
the debt correctly on its schedule of debts owed and there is no
dispute then the filing of a proof of claim is unnecessary. In Chapter
11 the Court sets the bar date and notifies creditors of the last day
for filing usually on the bankruptcy notice.
In both cases, 7 & 11, the Court has latitude in establishing
the bar date. For instance in Chapter 7 the Court can set aside the
bar date if it is determined by the trustee there are no assets to be
Failure to file the proof of claim by the bar date can result in
disallowance of the claim.
The Code permits the debtor and “any party of interest” to
object to the proof of claims filed and the Bankruptcy Court may allow
or disallow claims regardless of authenticity. This means that the
Court may allow contingent claims. If objected to, the Court
determines the amount of the claim.
It is essential that credit professionals understand the deadlines
imposed by the laws that have an effect on their ability to collect
the account receivable in order to protect their company’s rights.
I wish you well.
This information is provided for educational purposes only and
not as legal advice. Legal advice should always be obtained from
competent, licensed, certified legal professionals.