Most of the time when creditors receive a bankruptcy notice, they write off the debt and move on to their paying clients. They don’t realize that they have rights when it comes to their debtor’s bankruptcy claim. In many cases, creditors are entitled to certain aspects of their debtor’s bankruptcy. This article will explain what creditors rights are in a bankruptcy.
Creditors may actually be entitled to a share in the distribution of funds from the bankruptcy estate, depending on the priority of their claim. They also have the right to be heard in court for anything concerning the debtor’s plan. Depending on the situation they may also have the ability to discharge the debt.
As a creditor, you should first cease any collection action you have against the debtor. Then file a claim with the bankruptcy court.
After you’ve filed a claim with the bankruptcy court make sure you understand the different forms of bankruptcy and identify whether your claim is dischargeable. There are certain situations which usually cannot be discharged. Some of these situations include claims made as an obligation in a divorce, debts incurred by fraud or other malicious acts and damages that may have resulted from drunk driving. There are other situations that may not be able to be discharged through bankruptcy so be sure to speak to a lawyer about your specific debtor.
You may also be able to secure some of the debtor’s assets as payback for the debt. You can try to find out this information by looking at deeds and trusts of the property, or by hiring a lawyer to find out whether you have that right.
Collecting debts after a borrower files for bankruptcy is not a cut and dry process. To ensure you get all that you’re entitled to, speak to one of our lawyers that fully understand your rights.
Photo courtesy of Pixabay by Pexels.