Proving your claim in an insolvency administration
Aug 19 2025
Often creditors of a company or an individual will consider it a waste of time to lodge their claim once an external administrator or trustee is appointed. However, lodging a formal proof of debt as required, not only ensures that should surplus funds be available the creditor will be able to participate in any dividend, their debt will also be recorded for the purpose of receiving all correspondence issued to creditors and be invited to meetings of creditors convened in the respective administration.
The Corporations Act defines provable debts as all debts payable by, and all claims against, a company (present or future, certain or contingent, ascertained or sounding only in damages).
The Bankruptcy Act defines provable debts as all debts and liabilities, present or future, certain or contingent.
A proof of debt should be lodged by the creditor on the appropriate form (being Form 535 under the Corporations Act and Form 8 under the Bankruptcy Act). In addition to completing the appropriate form accurately and completely, it should be lodged together with any supporting documentation (ie judgements, invoices, contracts, agreements etc) to substantiate and explain the debt. Proofs of Debt may be supported by Statutory Declarations where there is a long history and or verbal agreements forming the basis of the claim.
Proofs of debt may be considered both for voting purposes and dividend purposes. The admissibility of the proof of debt for each purpose may be different.
When lodging a proof of debt, unless it has been requested for the distribution of a dividend, a Trustee or Liquidator may not adjudicate on its admissibility at that time. A creditor may always request an acknowledgement of its receipt for record keeping purposes. In a liquidation of a corporate entity, a creditor may request that its proof of debt is adjudicated, in writing, and the liquidator must do so within 28 days of receiving the request in writing. Should this not occur, the creditor may apply to Court for a decision.
Creditors’ claims submitted by a Proof of Debt may be admitted in full or part, rejected in full or part or prior to being adjudicated the creditor may be served with a notice requiring further evidence to substantiate all or part of the creditor’s claim.
Where there has been a rejection of part or all of a creditor’s claim, under the Bankruptcy Act, the creditor has 21 days to appeal the Trustee’s decision in Court. Under the Corporations Act, the creditor has the period specified in the notice of rejection to appeal the decision in Court, being a period not less than 14 days from the date of notice of the rejection.
Creditors may have security on which they may rely to satisfy their outstanding debts. However, occasionally they may wish to lodge a proof of debt to maximise their possible return particularly in circumstances where a creditor is aware that they will suffer a shortfall from the realisation of their security. Both the Bankruptcy Act and the Corporations Act allow secured creditors to lodge proofs of debt and vote at meetings for their shortfall amounts (or their full claim regardless of their security in a voluntary administration).
A secured creditor may estimate the value of their security and submit a formal proof of debt for the unsecured portion of their claim. A secured creditor should have a reasonable basis for estimating their security as it will affect their rights and obligations to both vote and participate in a dividend. An estimate of the value of the security may be subsequently amended and the creditor’s respective rights and obligations as they relate to voting and dividend participation amended.
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