In most chapter 7 bankruptcy cases, the amount of debt owed versus the amount of available assets to pay them is so lopsided it's common for bankruptcy trustees to tell creditors not to bother filing proof the debtors owe them money cause they're unlikely to get anything. However, in the small percentage of situations where there are assets that can be used to pay creditors, it's important to verify any proof of claims that are filed and object to the ones that fall into one of these two categories.
The Debt was Misclassified
When you file bankruptcy, the bankruptcy trustee will review your debts and label them secured, priority, or general unsecured. How a debt is classified affects whether the creditor will see any money from the bankruptcy case and the amount. Secured debts are typically not included in any payout because repayment of the debt is handled in other ways.
However, priority debts enjoy an elite status in bankruptcy law. Not only are they paid first, but many of them cannot be discharged through bankruptcy, meaning you'll still be responsible for taking care of the bill after your case ends. Unsecured debts are always paid last if there's anything left over to apply to those accounts.
It's important to object to a creditor's proof of claim if the information the creditor furnishes causes the debt owed to them to be misclassified. For instance, if the creditor claims it furnished you a loan against your retirement account (which is a priority, non-dischargeable debt) when in reality it was a regular personal loan. You need to refute that claim because the creditor may receive money that should be applied to other debt and the debt may survive the bankruptcy when it should be eliminated.
If you're not sure how a particular debt should be classified, consult with your bankruptcy attorney for advice and assistance.
The Repayment Amount is Inaccurate
Another instance when you'll want to object to a creditor's proof of claim is if the amount the creditor says you owe is inaccurate. The amount a creditor receives is based on the classification of the debt owed and how many other debts are in that category. For instance, if you only have one priority debt and 10 unsecured debts, the priority debt will be paid in full and anything left over will be divided equally among the remaining unsecured bills.
If the amount the creditor claims is inaccurate, this could lead to the company getting more or less than what it's owed, which could be problematic depending on the situation. Thus, it's important to check all amounts against your records to ensure creditors aren't trying to pull a fast one and get more than their fair share.
For help with your bankruptcy case, contact chapter 7 bankruptcy filling services.
