Chapter 13 bankruptcy allows debtors to propose a plan to reorganize their debts. Plans treat creditors differently depending on the debtor's goals and on the category of the claim. Unsecured claims get paid in Chapter 13 bankruptcy when the debtor has disposable income. These creditors may get paid in full, in part, or not at all, depending in part on the filer's ability to pay.
However creditors don't get paid automatically simply because they are listed in a Chapter 13 plan. Creditors must file a document called a proof of claim with the bankruptcy court. This document proves what is owed to them by the debtor, how much is owed, and why they are entitled to receive payment. There is a standard form that is used in bankruptcy cases for these types of filings. Creditors must also attach an affidavit, invoices, statements, or other documents that support the information contained in the proof of claim.
Debtors are given the opportunity to review these filings and may object if the information is incorrect or incomplete. Objections to claims can be filed for a variety of reasons including failure by the creditor to sign the document, inaccurate information in the exhibits, failing to provide assignments or proof that the claim was transferred from the original creditor entitled to collect on the note, etc. The most common objection to claim is for failure to collect the debt before the statute of limitations expired. However, in the Northern and Eastern Districts of Texas, debtors cannot object to a claim simply because the creditor failed to attach documentation.
Debtors can also object to a claim if it wasn't filed before the bankruptcy court's deadline for filing claims. The deadline for most creditors is 90 days after the first setting of the 341 meeting of creditors. For governmental agencies the deadline to file a claim is 180 days after the date the original petition was filed. A creditor's failure to file a timely proof of claim can result in a huge windfall for debtors. In cases where the debtors have significant disposable income and are proposing to pay all creditors in full, failure by a creditor to file a proof of claim can greatly reduce the amount that the debtor has to pay in their Chapter 13 plan.