In the event of a debtor’s bankruptcy, secured creditors are paid before unsecured creditors; therefore, creditors want to file a Proof of Claim as a secured creditor whenever possible.
What is a Secured Creditor?
The United States Bankruptcy Court defines a secured creditor as “a creditor holding a claim against the debtor who has the right to take and hold or sell certain property of the debtor in satisfaction of some or all of the claim.”
Properly executing a mechanic’s lien, bond claim or UCC, grants the creditor a secured interest, which increases the likelihood of payment in the event of a bankruptcy. Mechanic’s Liens, Bond Claims & UCCs are credit tools, proven to put creditors in the best possible position to get paid, but they aren’t the only tools available. A creditor may also be considered secured if there is a Corporate Guarantee or Personal Guarantee in place.
What is a Proof of Claim?
A Proof of Claim, per The United States Bankruptcy Court, is “a written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money. “
The Proof of Claim is filed by creditors, in order to notify the bankruptcy court there is money owed to them by the debtor. Typically a Proof of Claim will include the amount of the claim, the basis for the claim, whether or not it is a secured claim and of course, backup documentation supporting the claim.
Although the Proof of Claim form may seem straightforward, here are a few common missteps:
Be on Time! Too often, creditors miss the bar date to file.
Know your Claim! Including all amounts owed for all accounts and affiliates is a must.
Secured or Unsecured, that is the Question? Know whether or not you are a secured creditor and file properly.
Did You Know?
A creditor can have a secured & unsecured claim in the same bankruptcy!
If you need assistance with filing your Proof of Claim or have questions on how to become a secured creditor, please contact us.
*NCS does not engage in rendering legal advice. All options should be reviewed by your corporate counsel