In Chapter 13 bankruptcy debtors file a plan proposing to reorganize their debts. The plan basically says that the debtor intends to pay the creditors (or not pay them) and may change the way in which they are paid as well. After filing the plan, a confirmation hearing is scheduled where the plan is considered by the court and if all goes well it is approved by a judge.
However, creditors don’t get paid automatically simply because they are listed in a Chapter 13 plan. They have to file a document called a proof of claim. The proof of claim states how much they are owed, what type of claim they have (secured, unsecured, or priority), and lists the collateral for their loan, if any. If the creditor does not file a proof of claim then they will not be paid by the trustee. This is usually a very good thing for the debtor. In cases where debtors are repaying all of their debt, having a creditor not file a proof of claim could be like winning the lottery. I have had clients with cases in which they propose to pay back over a $100,000 in debt over the duration of their five-year plan, and only 20 to 30 percent of claims are filed. They basically saved $70,000 to $80,000 because their creditors failed to file a document with the court.
On the other hand, there are instances when a creditor doesn’t file a claim but the debtor needs the claim to get paid. The most common example of this situation is when a mortgage company who is being paid mortgage arrears in the plan doesn’t file a proof of claim. The debtor wants their mortgage arrears to be paid so that once the case is finished they will be current on their house. Similarly, car creditors sometimes don’t file a claim when they are being paid through the plan. When creditors don’t file claims the debtor may file one for them. The rules provide that a debtor has thirty days following the expiration of the creditor’s deadline to file a claim of their own.