Collecting Owed Debt During Debtor Bankruptcy
When consumers cannot or do not pay their bills, creditors and business owners face a difficult decision. Collecting debts often represent lengthy and costly endeavors that can add more than they’re worth.
When debtors enter bankruptcy, many collectors give up collections entirely. However, spending time to determine whether or not a pursuit remains viable can prove worth it.
Collectors stand to lose a notable amount of money simply because they believe collecting what is owed during a debtor bankruptcy requires too many resources. While sometimes this course may not be worth the time and expense, it isn’t as difficult as many think.
Creditor bankruptcy representation in Downtown Miami from a qualified firm like the Law Offices of Paul A. Humbert, P.L. can help to weigh the pros and cons of collection activities during bankruptcy while guiding collectors on the path to the best possible outcome.
Steps to Take During Debtor Bankruptcy
Every bankruptcy situation can play out differently. Nonetheless, the steps a creditor must take to collect a debt from consumers entering bankruptcy remain typically routine:
Stop Collection Activities and Comply with Bankruptcy Orders
In virtually all debtor bankruptcy cases, the court will issue an automatic stay to cease any and all debt collection activities. This enables a review of the case in bankruptcy court. Most creditors will record this account as “bankrupt” while ceasing any collections demands.
Analyze Debtor Bankruptcy Papers
A debtor must file bankruptcy paperwork with the court to enter the court’s protection. This documentation will list the debtor’s property that is part of the bankruptcy and which they believe remains protected.
The paperwork will additionally outline a list of known creditors and their status as:
- Secured with Collateral
- Unsecured
Understanding these two situations can help creditors make a realistic evaluation of the likelihood of case success. Although a long list of creditors may seem demotivating, many often fail to follow through with an entire bankruptcy process, leaving more property available than what initially appears.
Meet with Debtors
The court offers a creditor and their creditor bankruptcy representation in Downtown Miami the opportunity to meet with debtors for public examination. This can provide an avenue to question a debtor regarding the claim, in addition to making any inquiries regarding property relevant to satisfying the claim.
File a Proof of Claim
When creditors decide to continue pursuing collections, filing a proof of claim is critical. This document will state the creditor’s desire to remain a part of the bankruptcy proceedings. Creditors must additionally attach any documents that prove the validity of their claim against the debtor. Some common attachments may include:
- Contracts
- Records
- Communications with the Debtor
Once filed, the debtor has the opportunity to object to a creditor’s claim. If they object, the creditor must attend a court hearing. Without proof of claim, the creditor will likely lose their right as a part of the bankruptcy proceedings.
Attend the Debtor’s Bankruptcy Hearing
Depending on the type of bankruptcy that a debtor files for, creditors may be asked by the court to propose a reorganization and repayment plan to satisfy any outstanding debts.
During a Chapter 13 bankruptcy, the issue will go to a hearing. Here, the court will decide to approve, reject, or modify a debtor’s proposed repayment plan. This hearing offers creditors the right to accept or reject a debtor’s plan.
Let the Bankruptcy Proceed and Follow-Up
Once a creditor attends any applicable bankruptcy hearings, this will be on record with the court and involves the creditor to recover a debt. The bankruptcy will reach a trustee for administration while they oversee the repayment plan and distribution of their assets.
Creditors can additionally rely on counsel from their creditor bankruptcy representation in Downtown Miami for appropriate follow-ups and questions they may have for the trustee. Contacting a debtor can forfeit the creditor’s claim for payment under bankruptcy. For this reason, staying involved represents a better course to increase the chances of recovering any debt owed.
Creditor Bankruptcy Representation in Downtown Miami | The Law Offices of Paul A. Humbert, P.L.
Creditors should remain prepared to wait several months for a debtor bankruptcy to unfold. If any unusual issues arise during a bankruptcy situation, contacting a lawyer for creditor bankruptcy representation in Downtown Miami can help to evaluate whether or not continuing to pursue the debt collection matter still makes sense.
Our firm, the Law Offices of Paul A. Humbert, P.L., works hard as a trusted resource in the South Florida community to assist creditors with their debt collection process. To learn more about how we can help you, reach out to our friendly attorneys today for more information.
