If you’re a creditor in a bankruptcy case and diligently file a proof of claim on time, often months or even years may go by before you hear anything further about your claim from the debtor, bankruptcy trustee, or any other party. In fact, the only thing you may hear about your claim for a long time is an offer to purchase it made by one or more claims buyers.
No news is not always good news. Unfortunately, the passage of time may lead you to believe that no objection to your claim will ever be filed. However, the urgency of reorganizing a debtor’s business or liquidating its assets means that the claims objection process is typically left until near the end of the bankruptcy case, often after a plan of reorganization has been confirmed in a Chapter 11 case. As a result, an objection to your claim may be brought long after you filed it. When filed, the objection may assert that your claim amount doesn’t square with the debtor’s books and records or it may be based on any number of other grounds specific to the nature of your claim.
Is that an objection to my claim? When an objection is filed, it may not always be obvious at first. While an objection may clearly identify that it is directed to your claim, in large cases the debtor or other estate representative has so many claims to address that the objection to your claim will most likely be combined with others. Instead of a pleading specifically mentioning your name in its title or text, the objection may have a name such as “Notice of Debtors’ Fourteenth Omnibus Objections To Claims (Substantive)” or some similarly titled document.
- Be careful: the format of these objections can be a trap for the unwary. Buried within the objection’s many pages of text and attached exhibits may be a few lines, often in a list or chart, identifying that your claim is one of dozens to which an objection has been filed.
- Whatever the objection’s name or format, the point is the same: ignore it at your peril. If you don’t respond to the objection timely your claim will likely be disallowed and you will recover absolutely nothing from the bankruptcy estate.
Diligence is critical. As in other legal contexts, protecting your rights in a bankruptcy case requires diligence. This can be a significant task. In major bankruptcy cases, literally thousands of pleadings can be filed during the course of a case. Many of these will be served on creditors and other parties, whether in paper or electronic form, yet only a few may be important to you or your claim. For this reason, it is critical that you or your attorney keep track of the pleadings filed in a bankruptcy case. As mentioned in an earlier post, there are often special websites designed to assist creditors in following large bankruptcy cases, in addition to the Court’s own electronic filing system.
Protect your rights. The bottom line is, if you see anything that looks like a claim objection, you should review all of the pages carefully, including its exhibits. If an objection to your claim is filed, a timely response will be required to protect your rights. Otherwise, you may find yourself with a disallowed and worthless claim.