Creditors not bothering to file Proofs of Claim in an asset case?...

[leeandreab]

Would my lawyer have a reason to lie to us? My husband and I reported a pending inheritance (my husband's) to our lawyer that would almost cover our total debt. We were told by the lawyer not to worry because we would be able to keep a considerable amount of the inheritance. "Probably most of it" he said. The reason he gave was that a lot of the creditors, after originally being told not to file a proof of claim in our no-asset case, would have "wiped us from their system" and forgotten all about us. The sounded unbelievable to me, but I couldn't figure what reason he would have to give us false hope .

Has anyone ever heard of anything similar to what our lawyer predicted? What has been your experience (if you were ever in a similar situation)? Granted, we have no control whatsoever over what happens, but it would be nice to have a little peace of mind...and hope.

Our Chapter 7 has been discharged but the 90-day deadline to file a POC isn't over until August.

Everything I've read says that the trustee just takes it all and gives it all out, end of story. I haven't read anything online to support what our lawyer told us.

Can anyone shed some light?

Thanks!

[LadyInTheRed]

Well, if the initial 90 day deadline has not passed, I don't know how he can say no claims will be filed.

If creditors were told not to file claims, when your trustee is informed of the inheritance a notice will be sent to creditors telling them that there are assets available for distribution and giving them an opportunity to file claims.

Federal Rule of Bankruptcy Procedure 3002(c)(5) provides:

(5) If notice of insufficient assets to pay a dividend was given to creditors under Rule 2002(e), and subsequently the trustee notifies the court that payment of a dividend appears possible, the clerk shall give at least 90 days’ notice by mail to creditors of that fact and of the date by which proofs of claim must be filed.

I suppose it is possible that a creditor may have wiped you from their system and won't file a proof of claim. I wouldn't count on it, but your attorney has more experience than I do (I have no experience with this situation). He has no reason to mislead you. He said "probably", not definitely. So, hope he is right but be prepared for him to be wrong.

[justbroke]

It is actually surprising in Chapter 13s, which are all asset cases, where there is a sizable distribution and major creditors do not file claims! I had over $20K+ worth of claims not filed in my original Chapter 13 case. It happens in Chapter 7 cases just as well.

Typically, creditors pay important attention to a case when it first starts. In a Chapter 7, this is important because the case is filed as an "asset" or "no asset" case from the start. By the 341 Meeting, the Trustee has typically decided whether the case is earmarked to keep its asset/no-asset status. I would also say that most creditors decide whehter to sell the debt early. Yes, creditors actually sell bankruptcy debt to junk-debt buyers such as B-Line, B-Real, LVNV Funding, Roundup Funding, eCast Settlement and others.

However, upon filing of a Trustee's late notice of a potential distribution, some creditors have already given up and just charge-off the account. Some may file a claim in their own name. Some may then sell the debt. Given any scenario, you just never know what a creditor would do with a late notice of distribution!

A Trustee can only pay an "allowed" claim (period). If you don't file a claim, then your debt is discharged! (Unless it is already excepted from discharge.)

So, yes it does happen.

[leeandreab]

However, upon filing of a Trustee's late notice of a potential distribution, some creditors have already given up and just charge-off the account. Some may file a claim in their own name. Some may then sell the debt. Given any scenario, you just never know what a creditor would do with a late notice of distribution!

A Trustee can only pay an "allowed" claim (period). If you don't file a claim, then your debt is discharged! (Unless it is already excepted from discharge.)

So, yes it does happen.

Yeah, the lawyer emphasized the fact that the notice was being sent late. It's good to hear that it actually does happen. We don't expect to be able to keep most of it but it would be so nice to be able keep some of it!

[switch625]

It is actually surprising in Chapter 13s, which are all asset cases, where there is a sizable distribution and major creditors do not file claims! I had over $20K+ worth of claims not filed in my original Chapter 13 case. It happens in Chapter 7 cases just as well.

My largest unsecured creditor (several credit cards and almost half of my unsecured debt) did not file a proof of claim on my Ch 13 and it's now past the deadline. I do find this very surprising. It makes me wonder why I even bothered entering into pre-filing hardship plans if they were going to charge off my debt to them in BK and not file a claim. Another reason why Ch 13 BK is worth doing. I had another unsecured who didn't file a claim on a personal loan that would have been paid off this year. They may have recouped their principal and some interest, which I can understand would not be worth it for the creditor to be paid pennies on the dollar on a small remaining balance for 5 years.