The Short Answer
In a Chapter 13 bankruptcy, a proof of claim is the formal document a creditor files to notify the trustee that they are owed money and want to receive payments through your plan. Without a filed proof of claim, a creditor receives nothing — and that sounds like a win, but it isn't. If a secured creditor like your mortgage company doesn't file one, you'll finish your 3–5 year plan thinking you're caught up, only to discover you're now years behind and facing foreclosure. Your attorney should be actively monitoring which creditors have filed and can file a proof of claim on a creditor's behalf if they fail to do so.
When a bankruptcy is filed, creditors need to file a proof of claim. A proof of claim is basically a creditor stating: we are the creditor, this debt is owed and this is how much we (the creditor) are owed.
A proof of claim is important for two reasons. First, it provides proof that the claim is valid and owed (hence the name proof of claim). Second, the proof of claim notifies the bankruptcy Trustee that the creditor wants to be paid through the bankruptcy payments in a Chapter 13 bankruptcy.
If a creditor fails to file a proof of claim in a Chapter 13 bankruptcy they will not receive any payments and will not be paid. Now, that is not really an issue when it comes to unsecured debts like credit cards, personal loans or medical bills because those debts weren’t scheduled to be paid in full anyway, but it is an issue when it comes to secured debts such as mortgages and car payments. You might be thinking, “That sounds like a good thing if my creditors don’t file a proof of claim. If they don’t, then they don’t get paid and it’s their fault.” Unfortunately, that is not the case.
If your mortgage company fails to file a proof of claim, you still make your same monthly bankruptcy payment every month for the duration of the bankruptcy. But since the mortgage company didn’t file a proof of claim, they won’t receive a dime and more money will go to unsecured creditors and the rest of the creditors who filed proofs of claims. Then, at the end of your bankruptcy, you’re thinking you are all caught up on your mortgage payments and owe way less than you did when you originally filed, only to find out that since the mortgage company didn’t file a proof of claim, they got paid nothing, and now your mortgage is up to 5 years behind and foreclosure proceedings could start anytime, if it hasn’t already. Similarly, it’s also important that unsecured, priority debts like taxes, child support and alimony also have proof of claims filed if they are owed money as of the date of the bankruptcy petition being filed.
So you can see that a proof of claim is very important. Your attorney’s office should have procedures in place to make sure that secured creditors are filing proof of claims to avoid this problem. If a creditor fails to file a proof of claim, your attorney can file one on their behalf.
Key Takeaways
- A proof of claim is a creditor's formal notice to the bankruptcy trustee that they are owed a specific amount and want to be paid through your Chapter 13 plan.
- Secured creditors — like your mortgage lender or auto lender — must file a proof of claim or they will receive zero payments during your bankruptcy.
- If your mortgage company skips the proof of claim, you can emerge from a 5-year plan believing you're current, only to face a massive arrears balance and potential foreclosure.
- Priority unsecured debts like back taxes, child support, and alimony also require filed proofs of claim to be properly paid through your plan.
- Unsecured debts like credit cards and medical bills present less risk when no proof of claim is filed, since they aren't being paid in full anyway.
- If a creditor fails to file, your attorney can step in and file a proof of claim on that creditor's behalf to protect you from post-bankruptcy surprises.
Attorney Insight
The scenario I see catch people off guard: a client completes a full 60-month Chapter 13 plan, gets their discharge, and then receives a letter from their mortgage servicer showing they're $20,000 or more in arrears — because the servicer never filed a proof of claim and received no payments through the plan. The trustee can only pay what was claimed. That's why our office tracks proof of claim deadlines for every secured creditor and priority creditor in a case — not because creditors are always diligent, but because they often aren't. Filing a proof of claim on a creditor's behalf is a tool we use regularly, and it's one of the most important things a Chapter 13 attorney can do to protect a client's home.
