If you file for bankruptcy, most of your creditors will file a proof of claim -- a form that provides information about your debt -- in order to get paid. Sometimes a creditor doesn't file a proof of claim. In rare instances, you might want to file a proof of claim on that creditor's behalf. Here's why.
What Is a Proof of Claim?
Whether your creditors will receive anything in your bankruptcy case depends on numerous factors such as:
- the type of claim the creditor has
- whether you own nonexempt property
- whether you have disposable income, and
- whether you file for Chapter 7 or Chapter 13 bankruptcy.
If a creditor wants to get paid in bankruptcy, it has to file a form with the court called a proof of claim. The proof of claim provides information to the court regarding your debt and typically contains documentation to support the creditor’s claim.
(To learn more about the proof of claim, visit The Proof of Claim in Bankruptcy topic area.)
In most cases, creditors will file their own proofs of claim. But if one of your creditors fails to file a proof of claim, you can file one on its behalf if you want that creditor to get paid in your bankruptcy.
Why Would a Creditor Not File a Proof of Claim?
Creditors file proofs of claim in bankruptcy because they want to receive a portion of any potential distributions the bankruptcy trustee might make in your case. If a creditor doesn’t file a proof of claim with the court, it will not get paid even if it otherwise has a valid claim. But it is common for creditors to not file proofs of claim in bankruptcy.
A creditor might not file a proof of claim in your bankruptcy if:
- you have a no-asset Chapter 7 bankruptcy (meaning you don't have any property the bankruptcy trustee can distribute to your creditors, so they won't get paid)
- you owe the creditor a very small sum, or
- the creditor fails to follow the court’s instructions or otherwise makes a mistake.
Reasons You Might File a Proof of Claim for a Creditor
While it may sound strange to file claims on behalf of creditors in your own bankruptcy case, sometimes it can be in your best interest to do so. Below we discuss when it might make sense to file a proof of claim for a creditor.
You Want to Pay Off Your Nondischargeable Debts
Certain debts don’t go away simply because you receive a bankruptcy discharge. These are called nondischargeable debts and include obligations such as alimony, child support, certain taxes, and student loans. Because you remain on the hook for paying back your nondischargeable debts after your case is closed, you want these creditors to get paid before your other general unsecured creditors (such as credit card companies) in your bankruptcy.
This means that whether you have nonexempt assets that will be distributed to creditors in Chapter 7 bankruptcy or you are paying off a portion of your debts in Chapter 13 bankruptcy, you want to make sure that any creditors who have nondischargeable debts file their proofs of claim with the court. If they fail to do so, it will be in your best interest to file a claim on their behalf so that they can receive a portion of the proceeds in your case.
You Want to Catch Up on Missed Secured Debt Payments
If you are behind on your mortgage, car loan, or other secured debts, you can file for Chapter 13 bankruptcy to catch up on your arrears and save your property. If the purpose of your bankruptcy is to pay off your missed loan payments, you must make sure that the creditors you want to pay (such as your mortgage or car lender) file their proofs of claim with the court.
If they don’t file their proofs of claim, the trustee may request court permission to pay off your unsecured creditors instead. This means that if a secured creditor you intend to pay doesn’t file its claim, you may need to file it on its behalf.
For more information on how Chapter 13 bankruptcy can help you save your home or car, see our topic area on The Chapter 13 Repayment Plan.
When Can You File Proofs of Claim for Your Creditors?
Most creditors must file their proofs of claim with the court within 90 days of your meeting of creditors (government entities have 180 days from when you filed your case). Before filing a claim on behalf of a creditor, you must wait until the deadline expires for the creditor to file its own claim. After the deadline passes, you have 30 days to file the claim on behalf of the creditor.