Claim In Bankruptcy

Claim in bankruptcy is the document that the creditors file to recoup the debts that is due to the debtor that has been declared as bankrupt. There are certain steps and a specific procedure that is followed to distribute the assets of the bankruptcy estate among the creditors in order to settle their claim.

Some Fast Facts Regarding Claim In Bankruptcy

There are certain things associated with claim in bankruptcy that the debtors and creditors must be aware of.

•”Proof of claim” and “claim in bankruptcy” are not different documents. They are the same document with different tags. The document filed to register a claim against the assets of the bankruptcy estate is known as “claim in bankruptcy”. However, in the United States bankruptcy court, this document is also referred to as “proof of claim” in proceedings.
•The claim in bankruptcy must include the total amount of debt that is due to the debtor as of the date of the bankruptcy.
•The creditors may also submit claims for some priority status if that is relevant.
•A trustee is appointed by the bankruptcy court in order to handle the various claims in bankruptcy.
•When the trustee receives the claims, the first thing they will do is to notify the creditors (the claimants) whether their claims has been accepted or declined. Sometimes the claims in bankruptcy are accepted but at a reduced amount. Such things usually happen in case of chapter 13 bankruptcy where the debtor is allowed to continue with its operation while they have to pay off the debts simultaneously based on the suggested repayment plan.

Reasons Why Claims In Bankruptcy May Be Rejected

Following are some the reasons because of which the bankruptcy court may reject the claims in bankruptcy.

•The claims in bankruptcy may be rejected if the claims have not been liquidated. For example, if the creditors are claiming for the damages for such pain and suffering for which the judgment debt cannot be held responsible, their claims may be rejected.
•If the bankrupt is entitled for some special set offs as per the law and the claims do not take care of the same, it may also become a valid reason for rejection of the claims in bankruptcy.
•Disputed claims may also be rejected. For example, if there is a dispute regarding certain amount of debt, such as a bill for defective goods.
•If the priority statues as mentioned by the creditors in the claims in bankruptcy document is much higher than they are entitled to, their claims will usually get a straight rejection. For example, if the creditor is ordinary and is claims priority to estate assets, his claims will be objected.

When a claim in bankruptcy gets rejection, the bankruptcy court may set a hearing for the same.