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Creditors in Bankruptcy
You've received the unfortunate news that a person or business who owes you money has just filed for bankruptcy. What does that mean for you?
The Stay Means Stop
One of the most powerful tools in a bankruptcy case is the automatic stay. When a bankruptcy case is filed, creditors are "stayed" (stopped) from starting or continuing any collection efforts. That means no phone calls demanding money, taking a vehicle--almost anything is prohibited.
Creditor Rights in Bankruptcy Cases
Creditors will receive notice of the case filing and the meeting of creditors. If you choose to attend the meeting, the trustee will likely provide you with an opportunity to ask questions of the debtor.
It is important to determine the nature of the debt owed to you to begin to analyze your rights in a bankruptcy case. You may be secured lender (have a lien on a house, car or other asset), or unsecured. Your debt may be deemed non-dischargeable under the Bankruptcy Code as a matter of law, or you may be required to file an adversary proceeding (lawsuit) in the case to obtain a court order that the discharge does not apply to the debt owed you. If you are a secured creditor, you may be able to obtain relief from the stay and receive an order that permits you to proceed with collection efforts just as though the bankruptcy had not been filed. Creditors may be able to enter into a reaffirmation agreement with the debtor, whereby the debtor agrees to pay you, even though the bankruptcy has been filed. Because these require you file a motion or other pleadings with the Bankruptcy Court, nearly all creditors retain an attorney for assistance with this process.
Creditors, just like debtors, are best served when represented by a competent, experienced attorney. Contact us to discuss your rights and options as a creditor in a bankruptcy case.