Chapter 13 Bankruptcy Debtors Must Make Sure Secured Creditors File Claims

Chapter 13 Bankruptcy Debtors Must Make Sure Secured Creditors File Claims "Soon after filing for Chapter 13 bankruptcy, debtors propose a repayment plan to their creditors and a trustee. The plan specifies the terms for repaying the debts specified in the bankruptcy, which may include the payment amount, the value of collateral, the duration of repayment, the interest rate, and whether the debt will be repaid in equal and fixed payments or on a pro rata basis. Creditors and the trustee examine the plan to determine if their claims are being treated fairly, and if they are dissatisfied with their treatment, they can object to the court's approval of the plan. If no objections are lodged, the plan is typically confirmed and all creditors are bound by the plan's treatment of their claim.However, creditors cannot disregard the bankruptcy case following confirmation. Prior to receiving payments from the trustee as stipulated by the plan, creditors are required to file substantiation of their claim with the court. Sometimes creditors fail to submit claims, resulting in nonpayment. When unsecured creditors fail to file claims, debtors are typically delighted because the amount they may be required to pay in their bankruptcy case may be reduced. When secured creditors fail to file a proof of claim, however, the debtor must remedy the deficiency or risk losing their home, vehicle, or other collateral.Secured claims are obligations backed by collateral such as automobiles and homes. A secured claim provides the debtor with some protection. For example, if a mortgage is not paid, the mortgage lender can foreclose on the property and sell it to recover the debt. When listed secured creditors in a bankruptcy plan fail to submit proof of their claim, they are not paid, and when they are not paid, they repossess and foreclose on the collateral. It seems unjust that a bankruptcy debtor should suffer because a creditor failed to file a claim, but this is how the system operates.After plan confirmation, bankruptcy debtors must pay close attention to creditor claims. In the event that the secured creditor does not submit a claim, the Bankruptcy Code permits debtors to do so on the creditor's behalf. Monitoring the deadline to file a claim and ensuring that evidence of the secured claim is filed can save the debtor a substantial amount of money, their home, and their vehicle.
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