Page 87 - Bankruptcy Volume 1

Chapter 11

Determination of Claims and Interests

Upon the filing of a bankruptcy petition, the debtor may have obligations to creditors, equity holders, or
both. Obligations to creditors, or "claims," are debt obligations and are paid out before "equity interests,"
or obligations to equity holders. In most circumstances, as more fully described in the following pages,
the holder of a claim or interest must file the requisite forms with the court in order to recover on the ba-
sis of such claim or interest.

Section 501 of the Bankruptcy Code and Bankruptcy Rule 3002 provide for the filing of a proof of claim
by a creditor or indenture trustee. To ultimately be accepted, one need not generally file a proof of claim
in a prescribed form. However, the holder of the claim must state an explicit demand showing the nature
and the amount of the claim and provide evidence of an intent to hold the debtor liable for the debt,
(Sambo’s Restaurants, Inc., 754 F.2d 811 (9th Cir. 1985)). Notwithstanding the Sambo’s decision, care
should be taken to review and comply with any orders in the case setting a bar date and procedure for
the filing of claims.

Time for Filing

In a Chapter 7 or Chapter 13 case, an unsecured creditor or an equity holder must file a proof of claim or
interest, as applicable, to recover on such claim or interest. A secured creditor also must file a proof of
claim for the claim to be allowed under Section 502 or Section 506(d) of the Bankruptcy Code unless a
party in interest requests a determination and allowance or disallowance. A proof of claim is to be filed
within 90 days after the date set for the meeting of creditors under Section 341(a) of the Bankruptcy
Code. For cause, the court may extend this period. The court will also fix the time period for the filing of
a proof of claim arising from the rejection of an executory contract. In a Chapter 11 case, the deadline
for the filing of claims is ordered by the court following a motion to request the setting of such date. A
claim will be deemed filed where a debtor’s schedules list such claim without any marking to indicate
that the claim is contingent, unliquidated or disputed (CUD). If a claim is marked with any of the three
CUD components or the creditor disputes the scheduled claim, a proof of claim must be filed to permit
recovery.

According to Bankruptcy Rule 1019(3), claims that are filed in a superseded case are deemed filed in a
Chapter 7 case. Therefore, in a case that is converted from Chapter 11 to Chapter 7, a claim timely filed
in the Chapter 11 proceeding will be deemed timely filed in the Chapter 7 proceeding and the creditor
need not file an additional proof of claim in the Chapter 7 case. However, if the creditor’s claim was on-
ly scheduled and never filed in the Chapter 11 case, the creditor must file a proof of claim on conversion
of the case to Chapter 7 (see Bankruptcy Rule 1019).

Claim Amendments and Late Filed Claims

A timely filed proof of claim for a prepetition claim can generally be amended after the bar date, provid-
ed that the claimant is not amending the claim to include a new basis of recovery not raised in the timely
filed claim. Prior to the bar date, the claimant may amend the claim freely. Many cases have addressed
the extent to which proofs of claims can be amended after the bar date, including those filed by the IRS.
First, the proposed amendment must not be a veiled attempt to assert a distinctly new right to payment
as to which the debtor estate was not fairly alerted by the original proof of claim. Second, the amend-

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