04 Jan How Do Creditors Get Paid In Bankruptcy
If you have filed a chapter 13 bankruptcy a creditor will file a proof of claim with the bankruptcy court that determines the amount the creditor is owed. The creditor will then get paid on that claim depending on their treatment in the bankruptcy plan. That is why if you do not know the exact amount owed to a particular creditor you should estimate the amount and the creditor will file a proof of claim if needed. The most important thing our clients can do is make sure they have correct addresses for all of their creditors to make sure the creditors get notice of the bankruptcy.
In most chapter 7 cases creditors will not file proof of claims, since they will not get paid anything in the bankruptcy. The only cases where a creditor should file a proof of claim is if the bankruptcy is likely to result in a dividend to the creditors. The reason for a proof of claim being required in the bankruptcy is that credit card balances change daily, so if would be difficult to get a 100% accurate number for every creditor on a bankruptcy petition. It makes more sense for the creditor to file a proof of claim if needed, and the Trustee or other party in interest can then object to that claim.