Eviction Issues in Chapter 7

Unscheduled Claims

I am assuming those of you reading this understand that to be paid in bankruptcy, a creditor or claimant must file a proof of claim in accordance with Bankruptcy Rule 3002(a).  What we are discussing here is the failure to file your proof of claim by the Bar Date set by the court. The effect depends largely upon the chapter of the Bankruptcy Code under which the case is proceeding.

If a debtor’s schedules disclose an asset, and the trustee files a Trustee’s Report of No Distribution, then the asset is deemed “abandoned” and ownership reverts to the debtor. 11 U.S.C. Section 544(c). This is what happens in probably 98% of the Chapter 7 cases. There is, however, a couple of important caveats.  

If a creditor fails to file a timely proof of claim in a case in which one is required, and a dividend becomes payable, is the creditor shot on the ground? In most instances, the failure to file is going to be fatal, or at least hurt an awful lot. There is, however, a body of law recognizing what is called an “informal proof of claim” that may just save the day.

In certain instances, the trustee can “avoid” or set aside certain pre-petition transfers of property. This post addresses the question whether, and under what circumstances, a debtor may assert an exemption to all or part of recovery by trustee. The particular situation involves something that commonly occurs: movement of legal title and/or possession of a vehicle to and from parents and their children.

Debtors are frequently puzzled when they learn I need to send a notice of the filing of the bankruptcy case to their “ex.” They will get especially irritated if they happen to be current on their obligations. Emotions often run very high in those cases, and I try to explain it as diplomatically as possible.