Aluminum B (Takoma Park, MD)

Its not what you think it is, but a bar date is a good thing for a debtor in bankruptcy.

Everyone wants some amount of certainty in their life. The bar date gives debtors the certainty they need during the bankruptcy process.

If you file a chapter 13, or a chapter 7 with assets, the court will set a bar date for claims from creditors. This means a creditor must file its proof of claim by a set date, or the claim is barred from the case, and it won’t be paid.

Why does it matter?

Sometimes people are paying 100% of their debt in bankruptcy – especially in chapter 13.

One would think this is bad. But it may not be.

Some people need to shed investment properties, others need to walk away from a home that the lender will not modify. A pure financial decision to stop the bleeding of underwater mortgages or investments.

Many of these clients have no problem paying their credit card debt. In fact, many don’t carry balances.

So if they file a bankruptcy, the fewer creditors that file claims, the less the debtor has to pay back in chapter 13 plan payments or a chapter 7 buyback (a chapter 7 case which has assets that are unexempt).

In chapter 13, the less you have to pay back may equate less time spent in bankruptcy before you get your discharge.

The deadline to file a claim in a chapter 13 case is about 120 days for all creditors.  It is 180 days for governmental units (like the IRS).

Once your chapter 13 case gets to confirmation, any surrendered secured creditors (surrendered homes) have only 91 days to change their claim to unsecured.

Keeping a potential unsecured claim for a mortgage deficiency out of a chapter 13 plan can be a huge savings in how much you have to pay during the plan.