This article only addresses proofs of claim in Chapter 7 bankruptcy proceedings.
The general rule for proofs of claim is: Proofs of claim must be filed on or before any deadline set by the bankruptcy court for filing proofs of claim.
The corollary to this rule is: Proofs of claim do not need to be filed in bankruptcy cases where a deadline for filing proofs of claim is not set.
A deadline for filing proofs of claim is not set in all bankruptcy cases. Generally, in a “no asset” Chapter 7 case, a deadline for filing proofs of claim will never be set, and therefore, proofs of claim do not need to be filed. While it is not technically prohibited, the court and the bankruptcy trustee generally discourage filing proofs of claim in “no asset” Chapter 7 cases. This is because it creates an unnecessary administrative and paperwork burden on the court, and the court is concerned about secured creditors adding proof of service preparation fees to the underlying debt. Therefore, our firm generally recommends that proofs of claim be filed in Chapter 7 cases only if a deadline for filing proofs of claim is set by the court.
The remainder of this article will explain the particulars regarding the requirements for proofs of claim in Chapter 7 cases.
Deadlines for filing proofs of claim in Chapter 7 cases are governed by Federal Rules of Bankruptcy Procedure (“FRBP”). The requirement for filing proofs of claim depends on whether a Chapter 7 case is an “asset” or a “no asset” case.
“Asset” vs. “No Asset” Cases
Proofs of claim are generally required in an “asset” case, and are not required in a “no asset” case. An “asset” case is one where there are sufficient unencumbered assets to fund a distribution to creditors. Proofs of claim must generally be filed in an “asset” case in order for a creditor to receive a distribution. In an “asset” case, the deadline to file proofs of claim is typically 90 days after the first date set for the meeting of creditors (FRBP 3002(c)). A “no asset” case is one in which there will be no assets available for distribution to creditors. Most Chapter 7 cases are “no asset” cases. In a “no asset” case, proofs of claim are generally not required, since there will be no distribution to creditors (FRBP 3002(c)(5), and FRBP 2002(e) allowing court to notify creditors that it is unnecessary to file claims in “no asset” cases). Although it is not technically prohibited, the court and the bankruptcy trustee generally discourage filing proofs of claim in “no asset” cases.
How to Tell if a Case is “Asset” (Proof of Claim Required) or “No Asset” (Proof of Claim not Required)
A Chapter 7 case can start either as an “asset” or “no asset” case. They can also change during the pendency of the case. Therefore, it is important to know how to identify what type of case it is, and whether a proof of claim will be required or not. The general rule still always applies: Proofs of claim must be filed on or before any deadline set by the bankruptcy court for filing proofs of claim. However, a deadline for filing proofs of claim can be set at various points in a bankruptcy, or not at all.
The Notice of Bankruptcy
When a Chapter 7 case is filed, a “Notice of Chapter 7 Bankruptcy Case” (the “Notice”) is mailed to all creditors which are listed in the bankruptcy papers. This Notice will contain a date for the “Meeting of Creditors”. The Notice may or may not contain a deadline for filing proofs of claim.
In the circumstance where a Chapter 7 case is filed indicating assets will be available for creditors (an “asset” case), the Notice will contain a deadline for filing proofs of claim. As noted above, the deadline is typically going to be 90 days after the first date set for the meeting of creditors – although, it could be slightly different. Proofs of claim must be submitted by the deadline indicated in the Notice.
However, most Chapter 7 cases are filed as “no asset” cases. If it appears from the schedules filed with the bankruptcy petition that it is a “no asset” case, the Notice will usually not contain a deadline for filing proofs of claim and will instead include a statement that it is unnecessary to file claims unless otherwise notified (typically: “Please Do not File a Proof of Claim Unless You Receive a Notice To Do So”) (FRBP 2002(e)). In this case, a creditor is not required to file a proof of claim unless or until it receives notice to do so.
Later Notice of an “Asset” Case
Even if a case starts as a “no asset” case, it can later change to an “asset” case, whereupon a proof of claim will need to be filed. Many times this occurs after the meeting of creditors, after the trustee questions the debtor and determines that there are assets available for distribution to creditors (e.g., debtor “forgot” to mention the tax refund they are entitled to, or the Swiss bank account…). Sometimes the meeting of creditors is continued so the trustee can further investigate debtor’s assets. If the trustee determines there are assets available to distribute to the creditors, notice will be mailed to the creditors. The court will then set a deadline for filing proofs of claim and notify the creditors (typically in a notice entitled: “Notice of Possible Dividend and Order Fixing Time to File Claims”). This deadline will typically be 90 days after the case is determined to be an “asset” case (FRBP 3002(c)(5)) – although it could be slightly different. Proofs of claim must be submitted by the indicated deadline.
Final Notice of “No Asset” Case
If a trustee makes a final determination that there are no assets available for distribution to creditors, the trustee will file a “Report of No Distribution” with the court. This report signals that the trustee has made a diligent inquiry into the financial affairs of the debtor and the location of the property belonging to the debtor, and that there is no property available for distribution to creditors. In many cases, this report will be made immediately after the conclusion of the first meeting of creditors. In other cases, it may take the trustee longer to perform their investigation. The report is made only to the court, and creditors do not typically receive notice of the report. The debtor will usually receive a Chapter 7 discharge within 60 days after this report. The court mails a copy of the discharge order to all creditors and closes the case shortly after that without ever setting a proof of claim deadline. Because a deadline for filing proofs of claim is never set, proofs of claim in such a “no asset” case do not need to be filed.
In summary, proofs of claim must be filed in a Chapter 7 case when a deadline for filing has been set by the court. However, as long as a deadline for filing proofs of claim has not been set, proofs of claim do not need to be filed.
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