Bankruptcy Claims
Bad Debt Consolidation by splinder
Filed under Bankruptcy
Bankruptcy claims are paid in a specific order of priority and include both secured and unsecured claims. The debt claims of any bankrupt organization or individual include the secured claims or the claims that are backed by property or any other asset, as well as the various types of unsecured claims. While the secured claims are settled first, the settlement of the various unsecured claims is done on the basis of the priority list provided in the bankruptcy code.[br]
Bankruptcy Claims and Their Proof
All bankruptcy claims need some proof before they are settled. A claim is a right to payment even if it is not fixed in value, is due in future or contingent or even disputed. However, a secured creditor holding a pre-bankruptcy lien does not to file any proof and his claims are settled on a priority basis. In case a claim is partially secured, the creditor needs to file a proof of claim to establish the claim for the unsecured portion of the debt.
Settlement of Bankruptcy Claims[br]
The trustee in a bankruptcy case is responsible for notifying the various claimants or creditors whether the estate will allow the bankruptcy claims or has an objection to any of them. Bankruptcy claims can be rejected on several grounds. Some prominent reasons are:
· The claim is not liquidated, such as claim for damages for pain and suffering.
· The claim does not mention the appropriate set offs to which the debtor or the bankrupt entity is entitled to.
· The amount of claim is disputable and so needs to be settled through litigation.
· The creditor is seeking a higher priority than one’s entitlement.
· Claims filed after the due date.
· Claims relating to debts that have arisen after the date of a liquidation bankruptcy filing.
The settlement of secured creditors is followed by the payment of claims of the administrative creditors and unsecured claims in an involuntary filing that arise after the filing but before the appointment of a trustee. The wages or commission of employees of the debtor earned within 90 days before the date of the bankruptcy filing or the date of the cessation of the business are also settled on a priority basis. Then come the priority unsecured creditors whose claims are settled according to their statutory priority and finally to the non-priority unsecured creditors.