Wednesday, May 16, 2012

What is a Proof of Claimin a Texas Bankruptcy?

A “proof of claim” is an official form filed by creditors in a bankruptcy case that helps the trustee determine what debts are owed and how much to pay each creditor if there are assets available for liquidation or a payment plan.
Filing a proof of claim does not guarantee that you will be paid!  For example, in a chapter 7 bankruptcy case, creditors are paid only if there are non-exempt assets available for the trustee to liquidate.  In many cases there are no assets.  In cases with assets, their liquidation usually does not yield enough to pay creditors in full, but creditors may receive a partial payment.

Typically, when a bankruptcy case is filed, the trustee will provide notice to creditors that the bankruptcy case has been filed, and the notice will specify the date (the “bar date”) by which a proof of claim must be filed.  An example of this notice can be found at the following link:  Failure to file a proof of claim on time may “bar” a creditor's claim.

In the proof of claim, the creditor must set forth specific information such as its correct name and address, the amount of the debt as of the date on which the bankruptcy case was filed, and whether the claim is secured or unsecured.  Creditors should also attach copies of the documents that evidence the claim such as a promissory note, security agreement, UCC-1 financing statement, guaranty, or deed of trust.

A form proof of claim may be found at:, however, some local courts have their own versions of this form.
Some larger companies with collections departments and bankruptcy specialists will file their own proof of claim.  However, if you are unfamiliar with the bankruptcy process and deadlines, the best practice is to hire an attorney to assist you in navigating through the bankruptcy case.

Article by Sarah F. Berry, Attorney

Thursday, May 3, 2012

How to Determine the Texas Debtor’s Homestead: Involuntary Designation

What does a creditor do when the debtor or his/her spouse owns more than one piece of property but has never made a voluntary homestead designation using the methods described in section 41.005 of the Texas Property Code? Or when the debtor has designated more than one piece of property as his/her homestead, and it is unclear which property constitutes the homestead entitled to constitutional protection from most types of debt?

Subchapter B of Chapter 41 of the Texas Property Code describes the method by which a judgment creditor seeking execution of a writ on certain real property can force the debtor to make an election for purposes of designating the exempt homestead. See Tex. Prop. Code § 41.021 et seq. First, the creditor must send a notice to the debtor containing the proper statutory language. If the debtor fails to respond, the judgment creditor must then file a motion with the court that issued the writ of execution, requesting that the court appoint a commissioner to determine the judgment debtor’s homestead. See id. at § 41.023. After appointment, the commissioner will submit a report concerning his/her designation, which shall be confirmed, rejected or modified by the court, as deemed appropriate. Id.

The reasonable costs and fees associated with this involuntary designation process “shall be” taxed against the judgment creditor as part of the costs of execution. Id.

Article by Cynthia Veidt, Attorney