If you’re in a chapter 13 bankruptcy plan, your creditors don’t get paid unless they file a proof of claim. The proof of claim form gets filed with the court at the beginning of the plan.
Debts, notes and receivables are frequently sold from one creditor to another. For example, if you owe a debt to Capital One for a credit card, Capital One may file a proof of claim in your chapter 13 plan. However, if Capital One sold your debt (the receivable) to a collection agency (usually at a discount to the collection agency, not you), the collection agency files the proof of claim. The filing of your chapter 13 does not prevent the collection agency from selling the receivable to yet another collection firm.
Some collection firms, such as “B-Line” or “E-cast,” seem to specialize in buying receivables that are in chapter 13 bankruptcy plans. I’m not exactly sure how it works, but I suspect that B-Line and E-cast are buying the receivables for pennies on the dollar.
When one collector buys a receivable that’s in chapter 13 from another collector, they’ve got to notify the trustee and the court. If they didn’t, the disbursements from your chapter 13 plan would continue to go to the original claimant. Therefore, they file a NOTICE OF TRANSFER OF CLAIM. The Notice tells the court and the trustee that the receivable was sold and instructs the trustee to remit future disbursements to the new entity.
How does the transfer impact you or your case? The answer is simple: it doesn’t. No need to worry.
Of course, it’s always a good idea to review the claims filed in your chapter 13 with your attorney. I’ve seen many erroneous claims: some claims were duplicates of others, some claims were filed in the wrong case, some claims were barred by the applicable statute of limitations, etc. If you suspect a problem with one or more claims in your case, you’re entitled to object. If your objection is sustained, the claim may be reduced, re-classified, or even disallowed.
If you’d like to discuss the details or implications of chapter 13 or chapter 7 bankruptcy, shoot me an e-mail or give me a call. The consultation is always free.
Senior partner with Perrotta, Cahn & Associates
We have offices in: Cartersville, Calhoun, Dalton and Dallas