Creditor in Bankruptcy


If you are owed money and the person or business that owes you the money filed for bankruptcy you are a creditor in bankruptcy. You need to pay attention to the mail you receive and mark the various deadline on your calendar. You should seek counsel of bankruptcy lawyers in your area as well for more detailed information about the bankruptcy process. A common problem is how much should be spent trying to collect a debt now that the person or business has filed for bankruptcy protection? The answer is it depends. For the most part few creditors in bankruptcy participate in the process. It just costs too much to pay an attorney to monitor or participate in the bankruptcy case and get nothing from the bankruptcy estate in return.

The automatic stay becomes effective as soon as the person or business files their bankruptcy petition. You may not take any further collection action without permission from the bankruptcy court. So what now?
The first issues is what chapter of the Bankruptcy Code did the person or business filed under? If a chapter 7 case was filed then the likelihood of payment from the bankruptcy estate is unlikely. If the person or business filed a reorganization bankruptcy under Chapter 13 or Chapter 11 payment from the bankruptcy estate of some amount is likely.
The second issue is whether this is a business debt or a personal debt that is owed. If the debt is for the sale of goods to a business you may have additional rights such as reclamation. Reclamation rights belong to creditors to take back goods already sold to the business that has filed bankruptcy and not paid for the goods. There are specific time periods regarding reclamation.

If there are assets to distribute to creditors you will be asked to file a proof of claim. The proof claim provides the amount owed and why, with documentation attached to the proof of claim to prove the amount owed and why. In a chapter 11 or chapter 13 you may have to object to confirmation of the plan of reorganization. If you are not being treated properly based upon your type of claim or debt you need to objection to confirmation. Your objection will either be overruled or sustained.

If the case is a no asset no bar date Chapter 7 there is really nothing for you to do unless you believe you were the victim of fraud or some other argument to not have the debt discharged. You will need to hire bankruptcy attorneys to file an adversary proceeding on your behalf and argue the debt owed to you should not be discharged.