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What is a Proof of Claim form and why should creditors prepare one?
We quite often hear, :What is a “Proof of Claim “and why should I fill one out? – The Proof of claim form asks me if I want a copy of the s.170 report, what is that?"
When an individual (natural person or corporation) makes a filing under the Bankruptcy & Insolvency Act, (either a bankruptcy or a Proposal to Creditors)a Statement of Affairs is prepared by the debtor and sent to all known creditors along with a Proof of Claim Form. The Statement of Affairs lists each creditor with amounts owed, the realizable value of assets owned by the debtor, a statement of projected earnings or cash flow and some personal identifying information if the debtor is a person vs. a corporation. The debtor does his/her best to list all creditors and the amounts owed to each. However, each creditor ,if they want to participle in any dividend that may be paid out to creditors, must “Prove” to the trustee that the debt exists and provide the activity between the debtor and the creditor within the 3 months just prior to the date of bankruptcy. In order to do this each creditor must fill out the “Proof of Claim Form”
Further, if a meeting is called to review the conduct of the debtor or vote on the terms of a proposal, a Proof of Claim form must be prepared and submitted to the Trustee. Before the trustee can determine the voting rights of creditors or pay out any dividends, the exact amounts need to be determined. The Proof of Claim Form allows the creditors to prove the exact amount outstanding along with verification to the trustee. Creditors who do not file a Proof of Claim Form will not be entitled to receive any monies.
Under the Bankruptcy and Insolvency Act a report may be required to the filed by the trustee outlining the conduct of the debtor throughout the bankruptcy period. This report is commonly called the “Section 170 Report”. A S.170 report is only used for natural persons who have filed bankruptcy assignments. It is filed by the trustee when the debtor is almost completed the bankruptcy process in order to provide creditors with an overview of the proceedings detailing any events worth noting. The Section 170 report is not always prepared, but must be done in situations where the bankrupt has surplus income, when an opposition to the bankrupt's discharge has been filed, if the debtor has been bankrupt before or when there are any other reasons that would require a court hearing before a the discharge. A creditor will only receive this report if they have requested a copy and may be want to review the report to see if a dividend is projected and the expecting timing of the debtor’s discharge.
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