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What are proofs of claim?

Proofs of claim in bankruptcy matters are formal documents that creditors submit to establish their right to receive a distribution from the bankruptcy estate. These documents are essential in bankruptcy legal services for creditors in Florida, as they outline the nature, amount, and basis of the claim against the debtor.

For example, suppose a business owner in Florida files for Chapter 11 bankruptcy. The business’s unsecured creditors, such as suppliers or service providers, must submit proofs of claim to the bankruptcy court. The court will then review the claims, determining their validity and priority. If the court approves the claims, the creditors may receive a portion of the debtor’s assets or future earnings as payment.

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Which Florida laws and regulations apply to proofs of claim?

In Florida, state and federal laws apply to proofs of claim in bankruptcy matters. The primary federal law governing proofs of claim is the United States Bankruptcy Code, specifically 11 USC § 501, which establishes the right for creditors to file proofs of claim in bankruptcy cases. Additionally, the Federal Rules of Bankruptcy Procedure, particularly Part III (Claims and Distribution to Creditors and Equity Interest Holders), provide more detailed procedural requirements for filing proofs of claim.

At the state level, Florida law also plays a role in the treatment of proofs of claim. Florida Statutes § 727.112 outlines the procedures for filing proofs of claim in Florida’s state-law insolvency proceedings, known as assignments for the benefit of creditors. These proceedings are an alternative to federal bankruptcy cases and follow Florida law. Thus, creditors involved in Florida bankruptcy matters must be aware of and comply with federal and state laws and regulations when filing proofs of claim.

How do proofs of claim connect to the bankruptcy process?

Proofs of claim in bankruptcy matters are a vital component of the bankruptcy process, as they establish a creditor’s right to receive a distribution from the bankruptcy estate. For creditors, they provide a detailed account of the nature, amount, and basis of the claim against the debtor. When a debtor files for bankruptcy, the court sets a deadline, known as the “bar date,” for creditors to submit their proofs of claim. After the bar date, the bankruptcy trustee or debtor-in-possession reviews the filed proofs of claim, potentially objecting to any claims deemed improper or invalid.

Upon resolving any objections, the court classifies claims according to their priority. Secured creditors have the highest priority, followed by unsecured priority creditors and general unsecured creditors. The distribution of assets from the bankruptcy estate to creditors follows this priority order. Thus, submitting accurate and timely proofs of claim is crucial for creditors to maximize their chances of recovery in the bankruptcy process.

When a set of facts is appropriate for bankruptcy services, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation or another form of specialized bankruptcy advocacy, please contact our office to set up your initial consultation.

What legal risks are creditors exposed to when filing proofs of claim?

Consider the following forms of potential exposure:

  • Untimely filing: Filing after the bar date may result in the claim’s disallowance, preventing the creditor from participating in any distribution of assets from the bankruptcy estate.
  • Incomplete or inaccurate information: Providing insufficient or incorrect details in the proof of claim may lead to the claim’s disallowance or reduction, adversely affecting the creditor’s recovery.
  • Claim objections: The bankruptcy trustee, debtor-in-possession, or other parties may object to a creditor’s proof of claim, challenging its validity, priority, or amount. Successfully overcoming claim objections requires creditors to provide sufficient evidence to support their claims.
  • Fraudulent claims: Creditors who knowingly submit false or fraudulent proofs of claim may face sanctions, including fines and potential criminal prosecution under 18 USC § 152.
  • Violation of the automatic stay: Creditors must avoid any collection efforts against the debtor or the debtor’s property after the bankruptcy filing, as doing so may violate the automatic stay under 11 USC § 362, potentially resulting in sanctions.
  • Preference liability: Creditors who received payments or transfers from the debtor within 90 days before the bankruptcy filing may face preference liability, which could require them to return those payments or transfers to the bankruptcy estate.

Please contact our office to set up your initial consultation to see what forms of legal protection and advocacy may be available for your unique situation.

How should bankruptcy counsel facilitate the filing of proofs of claim?

Counsel should consider the following to protect their clients:

  • Timely filing: File proofs of claim before the bar date to ensure eligibility for a distribution from the bankruptcy estate. The timely filing also prevents disallowance due to untimely submission.
  • Thorough documentation: Provide comprehensive documentation supporting the claim, including the basis, amount, and any collateral securing the debt. This strategy minimizes the risk of claim disallowance or reduction due to incomplete or inaccurate information.
  • Monitor the case: Closely monitor the bankruptcy proceedings to promptly identify and address any claim objections or adversary proceedings, increasing the chances of successfully defending the claim.
  • Collaborate with debtor’s counsel: Establish a cooperative relationship with the debtor’s counsel to facilitate claim resolution and negotiate potential disputes efficiently and effectively.

Frequently Asked Questions

  1. Can a creditor amend a proof of claim after the bar date?

Yes, creditors may amend their proofs of claim after the bar date. However, amendments are subject to court approval, and in certain circumstances, the amended claim might be treated as a new claim subject to the bar date. Creditors should consult with their bankruptcy counsel to determine the appropriate action.

  1. What happens if a secured creditor fails to file a proof of claim?

If a secured creditor fails to file a proof of claim, they may still maintain their lien on the collateral, but they may not receive any distribution from the bankruptcy estate. In this case, the creditor can enforce its rights against the collateral outside the bankruptcy process, subject to the automatic stay’s termination.

  1. How do I object to another creditor’s proof of claim?

To object to another creditor’s proof of claim, a party must file a written objection with the bankruptcy court, specifying the grounds for the objection. The objecting party must also serve a copy of the objection on the claimant and other interested parties. The court will then schedule a hearing to resolve the objection, and the burden of proof is on the objecting party to show that the claim is invalid or deserving of reduction.

Have more questions about how bankruptcy services could positively impact your business operations and relationships?

Crucially, this overview of proofs of claim does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.

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