Costs imposed on creditors filing claims against the bankruptcy estate | In Principle

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Costs imposed on creditors filing claims against the bankruptcy estate

When filing a claim against a debtor in bankruptcy, a creditor must comply strictly with the judicial deadlines, or else face additional costs.

Filing a proof of claim is the basic means for a creditor to pursue its claims against the debtor in a bankruptcy proceeding. The proof of claim plays a role in bankruptcy comparable to that of the statement of claim in other civil proceedings. Both serve as the formal starting point for seeking satisfaction of the creditor’s claims through the courts. Through the proof of claim, the creditor becomes a participant in the bankruptcy proceeding and becomes entitled to the protection of the justice system. But while a filing fee is generally charged on a statement of claim, a proof of claim in bankruptcy need not entail any filing fee for the creditor—if the proof of claim is filed in compliance with the rules.

Generally no fee, but…

Under Polish bankruptcy regulations, a timely filed proof of claim is exempt from filing fees. Neither the Act on Court Costs in Civil Cases nor the Bankruptcy & Rehabilitation Law contains any provision requiring payment of any sum in connection with filing of a proof of claim within the period established by the court (apart from a treasury fee on the power of attorney if the proof of claim is filed for the creditor by counsel and the power of attorney has not already been filed in the case with the treasury fee, for example with a request to review the case file). The period for filing proofs of claim is always included in the order declaring the debtor’s bankruptcy, and ranges from one month to three months following publication in the official journal Monitor Sądowy i Gospodarczy.

The issue of filing fees does arise, however, if the proof of claim is filed after the deadline. Art. 235(1) of the Bankruptcy Law provides that in such case, the costs of the proceeding initiated by filing of the proof of claim are borne by the creditor. The creditor’s fault is irrelevant for purposes of this rule. Thus the creditor may not seek a waiver of the fee on the grounds that it was unable to file the proof of claim by the deadline. The only thing that will count is that, objectively, the deadline was in fact not met.

What exactly does the creditor have to pay for?

The main elements of the costs of the proceeding initiated by filing of a proof of claim include:

  • Costs of taking evidence to determine the validity of the late claim
  • Costs of publication in Monitor Sądowy i Gospodarczy (Bankruptcy Law Art. 52)
  • Pay of any persons who must be retained in connection with determining the validity of the claim
  • Costs of an objection to refusal to recognise the claim, if filed by the creditor (Bankruptcy Law Art. 256 and following).

Moreover, according to the legal literature, the general concept of costs under Bankruptcy Law Art. 235(1) also includes the costs of an objection by another creditor to recognition of a late claim if the objection is successful in obtaining an order denying recognition of the late claim.

But there is more. Under Bankruptcy Law Art. 235(2), the judge-commissioner may require the creditor to pay an advance against costs connected with filing of a claim after the deadline set in the announcement. And according to the literature, the creditor may be required to pay an advance against costs multiple times, if the amounts already paid prove insufficient to cover the costs as they accrue. The amount of the costs imposed on the creditor may thus increase as circumstances develop, and cannot be forecast with any certainty at the outset.

The sanction for the creditor’s failure to pay an advance against costs is rejection of the claim. Applying the Civil Procedure Code as relevant, this means that the court paper setting forth the claim is deemed not to have the effect of a properly filed claim. In other words, the judge-commissioner will treat the entire situation as if the proof of claim had never been filed at all. Consequently, the running of the period to file the claim is not interrupted, and the period set forth in the order declaring the debtor bankrupt continues to run from the date of publication in Monitor Sądowy i Gospodarczy. The statute of limitations on the debt is not interrupted either. Unlike the rule in Civil Procedure Code Art. 130 on rejection of pleadings in civil litigation, rejection of the proof of claim will not be preceded by a summons from the presiding judge of the court to cure the defects with the pleading (i.e., in this instance, to pay the advance against costs), but occurs as a direct consequence of the failure to pay the advance. However, it should be assumed in this regard that the deadline for payment of the advance set in the order by the presiding judge is a court deadline, and thus under Civil Procedure Code Art. 166 the creditor may apply to extend the deadline for good cause, but must apply for an extension before the existing deadline passes.

It should be added that there is a dispute in the legal literature whether relief from costs—filing in forma pauperis—is available with respect to the advance against costs on a late proof of claim in bankruptcy. It is also disputed whether an interlocutory appeal is available against the order of the judge-commissioner requiring the creditor to pay an advance against costs, or an order rejecting the proof of claim for failure to pay the advance.

In practice the risk of exposure to additional costs will primarily depend on the extent of the delay. This means that a minor default of a few days or weeks should not in most cases result in serious charges, as significant costs are unlikely to arise during such a brief time.

Hope for change?

Proofs of claim are one of the key issues taken up in a proposal for overall reform of the Bankruptcy & Rehabilitation Law currently being drafted by a team at the Ministry of Justice. One of the goals of the reform is to deformalise the claims filing procedure. Nonetheless, the ministry’s proposal so far does not include any plans to relax the requirements for creditors to cover the costs of claims filed after the deadline. As the proposal does not suggest any changes to Art. 235, this aspect will most likely remain unchanged. But hopefully the very simplification of the claims filing procedure may reduce delays in filing claims, as many of the hindrances to timely filing of claims under the current rules, which now contribute to the incidence of late-filed claims, should be removed.

Conclusion—better not wait

The regulations concerning proofs of claim in bankruptcy filed after the deadline are apparently designed to impose discipline on creditors and discourage them from delaying filing of their claims if they can help it. This is a clear and understandable attempt to promote judicial economy, so that proceedings run as quickly and efficiently as possible without generating excessive costs beyond what is necessary for effective consideration and resolution of the case.

Bartosz Trocha, Bankruptcy and Restructuring practices, Wardyński & Partners