Creditor Information on Filing Bankruptcy Proof of Claims

Capsule Article on Understanding the Basics of Bankruptcy Proof of Claims

By Nate Bernstein, Attorney at Law

     When an individual, a corporation,  or limited liability company files for protection under the bankruptcy code, the creditors of the bankruptcy debtor are prohibited from suing or collecting from the debtor in state or federal court.   This powerful protection is called the “automatic stay,”  and is derived from bankruptcy code section 11 U.S.C. 362.    Generally, the creditor can only take action against the debtor by seeking permission from the United States Bankruptcy court in the form of filing a motion, an adversary proceeding, or by filing a proof of claim.      

      If the debtor’s bankruptcy case has assets, or is being administered with a repayment plan, the creditor may actually get paid some amount from the bankruptcy debtor if the creditor files a timely proof of claim form in the proper bankruptcy court.   There are different types of claims in bankruptcy- for example, priority (i.e. child support or recent taxes), general unsecured (i.e. credit cards), or secured claims

( i.e. mortgage or judgment lien creditors).   Claims may be contingent, liquidated, or unliquidated. 

     If the creditor knows how much the debtor owes the creditor, and the creditor can document the amount owed as of the date of the filing, and a creditor wants to receive payment or a dividend from a bankruptcy case, the creditor needs to file a timely Proof of Claim with the United States Bankruptcy Court form with supporting documentation attached as an exhibit.    Generally, the creditor files a Proof of Claim forms in situations where there may be assets to be distributed by the debtor or the trustee appointed for the case.   Usually, in most Chapter 7 liquidation cases, the debtor has no assets, and the trustee closes the case without distributing assets.  In many Chapter 11 or 13 cases, the debtor’s estate can have assets, and the debtor may propose a plan that pays a dividend to creditors based on the proofs of claims filed in the case.    Therefore, it is advantageous for a creditor to file a proof of claim in cases where there is any chance that assets may be distributed to claimants. 

      In these situations, the creditor must file a proof of claim, must file a proof of claim in the correct format and category,  and the creditor must file the claim in a timely manner.    The deadline for filing proof of claims, or “Claims Bar Date”  is an important deadline, and may be set by the Court, and notice is given to creditors by the trustee who administers the case. 

     During the administration of a bankruptcy estate, after a proof of claim is filed, the debtor or the trustee, or another party in interest with standing, may file a written “claim objection.”   This is a situation where the objecting party may have factual, legal, or equitable grounds to argue that the proof of claim and its creditor should not participate in the distribution from the bankruptcy estate.  Examples include, the proof of claim is not filed timely, the claim is barred by an underlying statute of limitations, the creditor is claiming unmatured interest, the claim has no factual or legal basis, or the creditor received a partial settlement from another defendant in a related action, and thus the claim amount is excessive.    The claim objection process becomes akin mini lawsuit in the administration of the bankruptcy case, and is called a “contested matter” under Federal Rule of Bankruptcy Procedure 9014(a).  Allowance of claims is also governed by United States Bankruptcy Code Section 502(b).  The objecting party calendars a hearing, serves a written objection, and the Court hears the grounds for the claim objection.    The Court will rule on the claim objection, will determine the amount of such claim in lawful currency as of the date of the filing of the petition, and decide whether the creditor can participate in the distribution of assets or whether this creditor will watch on the sidelines while other creditors participate. 

     The issues surrounding proof of claims and claim objection contested matters are complex.  If you want to consult an attorney regarding a proof of claim or claim objection proceeding, or you need general legal representation for a bankruptcy case, please contact Nate Bernstein & Associates, Attorneys and Counselors at Law at (818) 995-9475.    Thank you for reviewing this capsule article on proof of claims.

Capsule Article on Quiet Title Actions

CAPSULE  ARTICLE ON UNDERSTANDING QUIET TITLE LAWSUITS. 

Author- Nate Bernstein, Attorney at Law

When you have a dispute as to the state of the title for a residential real property or commercial real estate, or an unfriendly person or entity is making a legal or equitable claim against your title, you can file a "quiet title"  lawsuit in the Superior Court where the property is located to resolve the claim.

      The claim can also be brought in conjunction with other claims, such as fraud,  a claim for cancellation of an instrument, or declaratory relief.    In a declaratory relief action, for example, the court has the power to determine the contractual rights of the parties as of a certain date. 

       In a quiet title lawsuit, you can also litigate a claim relating to a fraudulently executed or recorded deed of trust mortgage document.

       In the quiet title lawsuit, the Court will determine the state of the title as of a particular date, and has the power to clear title.    Title disputes can be adjudicated in an orderly manner without infighting or shouting matches.

       When this lawsuit is filed, you also record a lis pendens at the County recorder's office.   The term "lis pendens" is a  latin term for "action pending."    The lis pendens lets the world know that a lawsuit is pending, and that any subsequent grantee, subsequent purchaser, or lender, takes title subject to the claim.    Generally, a lender will not make a loan secured by a title that is subject to a lis pendens.    

     The quiet title action is important, if an owner wants to determine that he or she has superior rights to the title of a particular parcel of real property in comparison to other claimants.  Establishing a clear and marketable title is also crucial for receiving future financing, or for making a marketable future transfer by trust or will.   It is also important to have clear title if you start an eviction lawsuit- also known as an unlawful detainer action. 

     In reality, many quiet title lawsuits are settled after the case is filed prior to trial.     Cases often settle in mediation, and sometimes, when the defendant fails to defend the action , and a default is filed.  Because of the intricacies of the court process, you should retain experienced counsel to represent you in the quiet title action.

     If you have a question pertaining to your quiet title action, or you want to retain counsel to defend a quiet title action, please contact Nate Bernstein & Associates for a professional consultation.    Also, please check out www.quiettitleattorney.com.  

Nate Bernstein, ESQ.,  a member of the state bar of California and the los angeles county bar association, and is the principal of Nate Bernstein & Associates, a law firm located in Encino, California which concentrates in the areas of complex real estate litigation, commercial litigation, and bankruptcy matters.  Mr. Bernstein can be reached at (818) 995-9475 and THE E-MAIL ADDRESS OF  natebernstein@netzero.net.   THIS TESTIMONIAL DOES NOT CONSTITUTE A GUARANTEE, WARRANTY, OR PREDICTION REGARDING THE OUTCOME OF YOUR LEGAL MATTER.