Presentation on theme: "Chapter Twenty-One. Claims After reading this chapter, you will be able to: Describe the procedures and forms used in filing creditor claims in Bankruptcy."— Presentation transcript:
Chapter Twenty-One. Claims After reading this chapter, you will be able to: Describe the procedures and forms used in filing creditor claims in Bankruptcy proceedings List the various basic objections which a trustee may make to a creditor’s claim Define the various classifications given to creditor claims in bankruptcy estates: Secured, administrative, priority, unsecured, and subordinated Describe the Statement of Intention procedure applicable in consumer proceedings
Claim Remember that a ‘‘claim’’ is defined as ‘‘right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.’’ 11 U.S.C. 101(5).
Filing a Proof of Claim Deadline: By claims bar date set by Court or United States Trustee Documents: Proof of Claim: Official Form 10 Evidence of Claim (such as promissory note; invoice) Evidence of perfection of security interest (such as recorded mortgage or UCC financing statement)
Objection to Proof of Claim Objection Documents: Notice of objection—30 day notice required Declarations, where necessary Points and authorities, where necessary
Slide 1 of 2 Substantive Claim Objections A defense to the claim applicable under nonbankruptcy law (such as statute of limitations) Postpetition interest A property tax claim exceeding the property’s value Excessive or unreasonable insider atttorneys’ fee claims Postpetition alimony, support, or maintenance payments
Slide 2 of 2 Substantive Claim Objections Future rent on a rejected lease limited to greater of one year’s rent or 15 percent of three years’ rent remaining under lease, plus actual unpaid rent One year’s compensation, plus any actual unpaid compensation due under a long-term employment contract Claim is subject to the trustee’s avoiding powers Unreasonable refusal to accept composition in consumer case
Priority Claims Domestic support obligations Administrative claims “Gap Claims” incurred in involuntary proceeding Unpaid wages and benefits incurred within 90 days up to $10,000 per individual Pension plan contributions incurred within 180 days up to $10,000 per employee Farmers or fishermen with crops or catch in storage facility Deposits for consumer goods or services of up to $1,800 Most tax claims Financial institution minimum capital Death or personal injury caused by substance abuse Secured administrative claim where collateral used without consent or prior court order
Administrative Expenses Section 503 concerns administrative expenses. Administrative expenses are all claims incurred by an estate after an order for relief has been entered as well as any approved professional expenses incurred after commencement of the bankruptcy. Administrative expenses are normally accorded the highest distributive priority under the Bankruptcy Code except perhaps for superpriority secured claims approved by the court u.nder Sections 364 or 507(b).
Fee Sharing Prohibition Section 504 prohibits fee sharing, a practice that is common in some areas of the legal profession outside of the bankruptcy system. Section 504 prohibits referral fees in bankruptcy proceedings.
Tax Claims Determination Section 505 permits the Bankruptcy Court to determine previously undetermined tax claims. This provision specifically states that the Bankruptcy Court has jurisdiction to rule on the validity of tax claims affecting an estate.
Secured Claims A secured creditor is a creditor with a lien upon property in which the estate has an interest. The focal point of Section 506 lies in determining the value of the collateral securing a secured claim.
Statement of Intention Contents 1. Notice required to be given secured creditors of consumer debt, advising of intended disposition of collateral after a Chapter 7 filing 2. Methods of disposition a. reaffirm b. return collateral c. redeem collateral
Statement of Intention Time Limits 1. Notice must be given within 30 days of filing 2. Intention must be performedwithin 30 days of date first set formeeting of creditors 3. Stay relieved by operation of law at end of time period (11 U.S.C. §362(h)).
Redemption Redemption involves the right of a Chapter 7 consumer debtor to pay a secured creditor the fair market value of the collateral, thereby obtaining a release of the lien.
Priority Claims Certain claims are categorized as unsecured priority claims. Priority claims are required to be satisfied prior to other general unsecured claims in all proceedings unless an affected creditor agrees to a lesser treatment.
Categories of Priority Claims Claims for domestic support obligations Administrative expenses under Section 503 Unsecured gap claims incurred under Section 502 Unpaid wages Unpaid contributions to an employee benefit plan Unsecured claims of grain producers or fishermen for their produce or catch in the possession of a storage facility Situations involving consumers who have made deposits for consumer goods or services Tax claims Commitment by a financial institution to meet minimum capital requirements to an appropriate regulatory agency Claims for death or personal injury resulting from the operation of a motor vehicle or vessel because the debtor was intoxicated.
Section 507(b) Section 507(b) provides a secured creditor a priority claim superior to all other administrative expenses where the creditor’s collateral has been sold, used, or leased without consent or court approval.
Codebtor Claims Section 509 is about the claims of a codebtor of a debtor. The cosignor of a loan is a codebtor. If a codebtor pays the debts of a debtor, then the codebtor aquires the rights of the satisfied creditor.
Subordination A claim that is subordinated is given a lesser priority than it is otherwise entitled to under the Bankruptcy Code. A creditor may be subordinated for two reasons: If a creditor consents to subordinate itself to a lesser priority claim Equitable subordination—a claim may be equitable subordinated by a motion.