Your Customer Filed for Bankruptcy. Don’t Ignore the Claim.

For a business that is owed money, few pieces of mail land harder than a bankruptcy notice about a customer. The reflex is understandable: the debtor is broke, the court is involved, and the whole thing feels out of your hands. Many creditors quietly write the balance off and move on.

That reflex is often a mistake. A bankruptcy filing does not automatically erase what you are owed, and it does not decide, on its own, whether you get paid. In many cases, the most important first steps are to stop any prohibited collection activity, determine whether a proof of claim is required or advisable, and calendar every applicable deadline. Creditors who do nothing frequently forfeit money they were eligible to receive through the bankruptcy case.

First, what you must stop doing: the automatic stay

A bankruptcy filing also ordinarily triggers the automatic stay. Creditors generally must stop collection calls, lawsuits, repossessions, and other efforts to recover a pre-bankruptcy debt unless the court grants relief or an exception applies. Filing a proof of claim is a way to participate in the bankruptcy case, not permission to continue collecting outside it. Violating the stay can expose a creditor to sanctions, so the safest course is to pause collection first and then evaluate the case.

A proof of claim is how you get in line

A proof of claim is a formal statement telling the bankruptcy court that the debtor owes you money and how much. Section 501(a) authorizes a creditor to file one, while the Bankruptcy Rules determine when filing is required. In many cases, failing to file means giving up the opportunity to receive a distribution, but Chapter 11 scheduled claims and certain secured claims require separate analysis.

Under 11 U.S.C. § 502(a), a filed claim is deemed allowed unless a party in interest objects. In addition, Bankruptcy Rule 3001(f) provides that a proof of claim signed and filed in accordance with the rules is prima facie evidence of the claim’s validity and amount. Proper documentation therefore matters: an incomplete filing may lose that evidentiary benefit even if the claim is not automatically disallowed. The presumption is also not the last word. If a party objects and produces evidence sufficient to rebut the claim, the ultimate burden of proving the debt can remain with the creditor.

Filing is not always required, and not always risk-free

Filing is the right move in most cases, but a few real exceptions are worth knowing before you act. In a Chapter 11 case, a claim that the debtor has accurately scheduled, and has not marked as disputed, contingent, or unliquidated, generally does not require a separate proof of claim. A secured creditor’s lien ordinarily survives the bankruptcy even if no claim is filed, although filing may still be necessary to receive a distribution from the estate. And filing carries a strategic cost in some situations: submitting a proof of claim brings the creditor into the bankruptcy court’s equitable claims-allowance process and can eliminate the right to a jury trial in a related preference action, Langenkamp v. Culp, 498 U.S. 42 (1990). If you received significant payments shortly before the bankruptcy and preference exposure may exist, it is worth getting advice before filing, not only after a demand arrives.

Doing nothing has a real cost

When a company is liquidated in Chapter 7, the trustee distributes whatever the estate collects according to a fixed order set by 11 U.S.C. § 726 and the priority scheme in 11 U.S.C. § 507. As a general matter, timely-filed unsecured claims are paid ahead of late ones, though the treatment of late claims can vary, and unsecured creditors share in what remains after secured and priority claims are satisfied. If no proof of claim is filed by you or on your behalf, you ordinarily will not participate in the distribution, no matter how legitimate the debt.

Chapter 11 is even less forgiving on this point. Under Federal Rule of Bankruptcy Procedure 3003(c), a creditor whose claim is not listed on the debtor’s schedules, or is listed as disputed, contingent, or unliquidated, must file a proof of claim. A creditor who is required to file and fails to do so, in the words of the current rule, “will not be treated as a creditor for that claim for voting and distribution.” Skipping a required filing can forfeit both your vote on the plan and your share of the payout.

The deadlines are short and strict

Bankruptcy claim deadlines, often called “bar dates,” arrive faster than people expect, and courts enforce them. In a voluntary Chapter 7 case, and in Chapters 12 and 13, a creditor’s proof of claim is generally due 70 days after the order for relief, subject to important exceptions. An involuntary Chapter 7 case generally carries a 90-day deadline. Chapter 11 bar dates are ordinarily set by the court. Because the applicable date depends on the chapter, the type of claim, and the court’s orders, creditors should rely on the case notice and docket rather than a general rule of thumb.

This is exactly where careful monitoring matters. A deadline only helps if someone is watching for it, calendaring it, and getting the claim filed with the right supporting documentation before it passes.

The “no-asset” notice that tells you not to file

Some Chapter 7 notices instruct creditors not to file a claim, because it initially appears there are no assets to distribute. It is tempting to treat that notice as the end of the story and close the file. It is not.

If the trustee later discovers assets, such as a recovered payment, an unreported account, or a successful lawsuit by the estate, Rule 3002(c)(5) requires the clerk to send creditors a new notice that claims may now be filed, along with a fresh deadline. Creditors who stopped paying attention can miss that second window. Monitoring the docket is what turns a “no-asset” case that quietly becomes an asset case into an actual recovery.

Monitoring protects more than just the claim

Filing the claim is the beginning, not the end. Over the life of a case, several things can happen that directly affect a creditor, and each one has its own response and its own clock:

• An objection to your claim. If the debtor or trustee objects, you may need to respond and prove up the debt or risk having the claim reduced or thrown out.
• A wrong or missing amount on the debtor’s schedules. In Chapter 11, an omitted claim, or one listed in the wrong amount or marked disputed, contingent, or unliquidated, may make filing a proof of claim necessary to preserve your full rights.
• A demand to give money back. A trustee can try to recover certain payments the debtor made to you shortly before filing (a “preference”). Receiving a demand letter or lawsuit is not the same as owing the money. There are real defenses, but they have to be raised properly and on time.
• Overlooked priority or supplier rights. Goods the debtor received within 20 days before the bankruptcy may support an administrative-expense claim under 11 U.S.C. § 503(b)(9), and a supplier may have reclamation rights, but those rights carry separate, short deadlines and have to be asserted correctly.

These developments do not all arrive the same way. Some come by formal notice in the mail or electronically; others are easiest to catch by monitoring the court docket. Either way, staying engaged with the case is as important as filing in the first place.

Where an attorney adds value

Much of this can be done by a creditor alone, and for a small, clearly documented debt it sometimes makes sense to file a claim and watch the docket yourself. But the value of counsel grows with the size of the exposure and the complexity of the case. An attorney prepares and files the proof of claim with the right supporting records, calendars and meets the bar date, monitors the docket for objections and plan developments, evaluates preference exposure before a claim is filed and responds if a demand arrives, and identifies priority, secured, or reclamation rights that a creditor may not know it has. For a business weighing whether a debt is worth pursuing, that assessment itself is often the most useful first step.

A Michigan creditor-side practice

The Law Offices of Maynard F. Newman, P.L.L.C. represents businesses and lenders on the creditor’s side of bankruptcy and commercial collections in Grand Blanc and throughout Michigan. If a customer or borrower has filed, or you have received a notice and are not sure what it means, we can review the case, advise whether a proof of claim is required or advisable, file and support it, and monitor the proceeding so that your rights are asserted before the deadlines close.

Frequently asked questions

Do I have to hire a lawyer to file a proof of claim?

No. A creditor may file a proof of claim on its own, and for a small, well-documented debt that may be all that is needed. Counsel becomes more valuable as the amount at stake and the complexity of the case increase, for example if your claim is disputed, if you receive a demand to return a payment, or if you may have priority or security rights.

What happens if I miss the deadline to file?

It depends on the chapter, but missing the bar date generally hurts. In a Chapter 7, a late claim is usually paid only after timely claims, if anything is left, though a creditor who genuinely lacked notice of the case may in some situations still share with timely claims. In a Chapter 11, failing to file when required can mean you are not counted for voting or distribution at all. The safest course is to identify the deadline early and file well before it.

The notice told me not to file a claim. Is the case over?

Not necessarily. That instruction is used when it appears there are no assets to distribute. If the trustee later finds assets, the court sends a new notice with a new deadline to file. Because that can happen months later, it is worth monitoring the case rather than closing your file after the first notice.

A trustee is demanding that I return money the debtor paid me. Do I have to?

Not automatically. A demand to repay a pre-bankruptcy payment (a preference) is a claim, not a judgment, and creditors often have valid defenses. But these matters have deadlines and require a proper response, so a demand letter should be taken seriously and reviewed promptly.

Please note: This article is provided for general educational and informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship between you and the Law Offices of Maynard F. Newman, P.L.L.C. Federal bankruptcy deadlines and outcomes depend on the specific case and chapter; you should consult a qualified attorney before relying on anything described here. This content may also be considered attorney advertising.

Primary sources: Automatic stay (U.S. Courts); 11 U.S.C. § 501, § 502, § 503(b)(9), § 507, and § 726; Federal Rules of Bankruptcy Procedure 3001, 3002, and 3003; and Langenkamp v. Culp, 498 U.S. 42 (1990).