How it Works
Register and then add your claim
Sellers are required to provide basic information to share with interested buyers
Receive bids on your claims
Ensure that you are receiving the best price execution for your claim by receiving multiple bids
Agree a deal
Agree a price that works for you, while working with the claims team to complete the relevant legal documentation
Closing the trade
Transfer the claim to the buyer and receive your payment
Claims Trading Overview
Bankruptcy Claim Trading primarily involves two parties: a buyer and a seller. As the selling party, the creditor is selling their uncollected receivable against a debtor in a bankruptcy case. As the buying party, a bankruptcy claims trading firm purchases the ownership and claim rights from the creditor in the bankruptcy case.
Creditors involved in a bankruptcy case can be companies or individuals, typically buyers or bankruptcy claim traders are professional investors such as hedge funds or regulated investment companies who have long term lock up capital and have the time, expertise and legal resources required for these lengthy processes.
Aside from the buyer and the seller, other parties may also be involved in the claims trading process, such as: Legal and Financial Advisers, Brokers, Bankruptcy Claims Agents, and the Bankruptcy Court. Legal and Financial Advisers for both parties may be asked to consult on the transaction, assist in the dealings with the Bankruptcy Court, assess the claim value, perform due diligence, conduct other bankruptcy claims services and ensure that all interests are aligned by reaching a contractual agreement.
Bankruptcy claims agent may be logistically involved as a contracted partner of the debtor within a Bankruptcy Court case and act as the approved legal administrator for the Claims Registrar. Thus, claim transfers and court filings would flow through a bankruptcy claims agent’s administrative operations.
Although the Bankruptcy Court does not oversee the details of a claim trade, the claim transfer in ownership is officially recorded with the court, and the debtor in the case is notified. Any legal objections, dismissals, or modifications to payment terms on claims are ruled by and approved by the Bankruptcy Court.
Claims trading is both a legally and financially complex transaction. Therefore, the process can differ from trade to trade. It normally takes years before there is a distribution and the claims can change hands on multiple occasions during that time as trading can begin as soon as the bankruptcy petition is filed.
The 12 steps to complete the sale of your Bankruptcy Claim
1.Proof of Claim
A Proof of Claim is a document that a creditor files with the bankruptcy court to assert their legal right to repayment from the debtor (click on the eagle below to take you to the page as it has no affiliation with CryptoClaims.Pro). It consists of a Proof of Claim Form and usually includes additional documentation that describes the nature and circumstances of the claim, while supporting the creditor’s assertion that they are owed a specific quantum of money.
Generally, a creditor can expect to receive a blank Proof of Claim form (Official Form 410, sometimes referred to as Official Form B 410), included with a Notice of Bankruptcy, from the clerk of the United States Bankruptcy Court. As it can be time consuming and tricky to properly calculate your claim and complete the form and related paperwork, it is advisable to seek legal counsel to ensure the accuracy and timely submission of your Proof of Claim.
2. Listing Bankruptcy Claim for Sale
Outside of the bankruptcy case, the creditor can separately list their claim for sale by looking for prospective buyers by registering with CryptoClaims.Pro.
3. Buyer Contacts the Creditor via CryptoClaims.Pro
CryptoClaims.Pro already has an extensive list of qualified buyers who are able to view the creditors claims once the seller has registered. If you are interested in buying crypto claims, please sign up to get access to our offers.
4. Provision of additional documentation
The creditor is asked to provide additional supporting documentation to supplement their claim. This would include the same documentation that is provided as part of the Proof of Claim, such as your unique customer number, the tokens that you had on your account at the petition date and, if possible, details of your trading activity for the previous 90 days (the deposit and withdrawal files, the exchange rate (vs USD) at the time of each deposit / withdrawal, as well as the USD value) and any other pertinent documentation.
5. Buyer Performs their Due Diligence
Once the creditor has shown interest in selling their bankruptcy claim to the inquiring buyer and provides the supporting documentation, the buyer will then perform their own due diligence on the claim. Bankruptcy claim traders will typically confirm whether there is any pending litigation between the debtor and the creditor and determine whether the creditor is readily identifiable as a target of avoidance of litigation. As example, a buyer would review the debtor’s statement of financial affairs, which lists all entities that received payments during the 90 days before filing for bankruptcy as this could be subject to a potential clawback.
Additionally, a buyer could also obtain a preference risk representation and other representations from the creditor to ensure that they have not been involved in any misconduct that would lead to disallowance or subordination of their claim.
6. Buyer bids on the Claim
The buyer will then make an official bid to the creditor. Prices can vary depending on the complexity, preference payments, duration of the distributions and recovery price during the bankruptcy proceedings.
7. Creditor accepts the Bid
After reviewing the bid and consulting with Legal and Financial Advisers or representation, the creditor will formally accept the buyers price.
8. Trade Confirmation
CryptoClaims.Pro then prepares and sends the creditor a trade confirmation to formally record the trade terms and purchase price. The trade confirmation will contain formal written record of the material terms of the agreed upon sale, including the following:
- Debtor’s name, case name, and case number.
- Description of the claim, claim amount and claim number.
- Percentage rate used to determine the purchase price (this is typically written as a percentage of the scheduled undisputed claim amount).
- Other specific terms of the trade.
The trade confirmation will typically include confirmation that the sale is contingent on the execution of an assignment of claim agreement that is deemed acceptable by both the buyer and seller.
9. Assignment of Claim Agreement
Upon the buyer and creditor having agreed to the terms that are outlined in the trade confirmation, they both sign a contractual agreement, referred to as the assignment of claim agreement. This agreement will contain standard provisions that are dependent on the following:
- The nature and size of the claim;
- Relationship between the buyer and seller;
- The price being paid for the claim.
Creditors then review this agreement thoroughly to ensure that it does not include any non-negotiable or objectionable terms that would prevent the transaction from closing.
The creditor sign a Seller’s Agreement to offer their claims exclusively through CryptoClaims.Pro for a specified number of business days. Sellers send us an execution copy of the claim agreement together with relevant exhibits and copies of supporting documents.
Once a transaction is confirmed by CryptoClaims.Pro, a Claim Agreement signed by the seller with all exhibits will be sent to the prospective buyer identified in the Agreement.
10. Creditor files an Evidence of Transfer
The creditor files a claim transfer (Evidence of Transfer) with the Bankruptcy Court, in order to officially transfer ownership of the claim to the new buyer.
11. Buyer Sends Payment
Once the assignment of the claim has been done, the buyer then sends payment to the creditor.
12. Buyer Becomes the New Creditor
The buyer is now listed as the owner of the claim against the debtor in the pending bankruptcy case. The buyer is now effectively the new creditor. The former creditor is no longer involved with this claim in the bankruptcy case, except under specific extenuating circumstances agreed upon with the buyer.