Creditor Rights During Debtor Bankruptcy
Creditors sometimes find themselves involved in a bankruptcy case with a debtor as part of the debt collection process. Unfortunately, these situations impart a unique set of challenges that may offer various options depending on:
- The bankruptcy chapter filed by the debtor
- How the claim arose
- The proceedings that take place during the bankruptcy case.
Many creditors may receive a notice concerning the debtor’s bankruptcy to cease the relationship. This occurs because many creditors think they no longer have the right to collect their rightful property once the bankruptcy occurs.
This isn’t true. Creditors remain entitled to a share of the distribution of liquidation that stems from the bankruptcy estate. The court will disperse funds after making a ruling according to the priority of the claim.
Creditors can additionally rely on the court as an open forum to voice concerns about:
- Debtor bankruptcy plans
- Liquidation of nonexempt assets
- Payments from these assets in the estate
Creditors may also challenge a debtor’s right to discharge specific debts depending on the type of bankruptcy they file.
No matter the bankruptcy case filed, or the type of creditor claim against the debtor, these cases remain complex and convoluted, as well as challenging for legal professionals to litigate. Seeking out consultation and creditor bankruptcy representation in Miami from an experienced and aggressive attorney is the best way to achieve a positive outcome.
What to Do During a Debtor’s Bankruptcy Case
Creditors should immediately stop collection actions. This includes seemingly innocuous activities such as telephone calls and billing statements but extends to lawsuits that may remain in “pending” status with the court.
A debtor’s bankruptcy initiates an automatic stay, protecting the debtor and their property for all forms of collection once the bankruptcy proceeding begins.
The court will send out a notice of bankruptcy to all of the debtor’s creditors that outlines where they can file a proof of claim, in addition to the applicable deadlines for doing so. Hiring a qualified legal professional for creditor bankruptcy representation can help keep filings and dates on track to avoid unnecessary delays and case pitfalls.
An attorney will additionally guide creditors to determine if the claim is or isn’t dischargeable. Certain types of creditor claims remain non-dischargeable under Chapter 7 bankruptcy. Some other obligations that can affect dischargeable debt include:
- Divorce
- Debtor Fraud
- Damages Due to Drunk Driving
Consulting with an attorney regarding creditor bankruptcy representation in Miami remains imperative if a creditor claim resides within one of these categories. A legal specialist can file an adversary proceeding to preserve the claim when an unforeseen bankruptcy claim abruptly occurs.
Dealing with Secured Assets
Before the bankruptcy claim filing, credit claims may be secured against a debtor’s property. This provides creditor rights to debtor property that can act as collateral in favor of their claim.
A creditor can prove this to the courts with a deed of trust on tangible property, judgment liens, or any other security contract on personal property.
When creditors have secured property claims, this provides the best possible chance to reclaim at least some compensation for their debt during the automatic stay period of a bankruptcy claim.
An attorney providing creditor bankruptcy representation in Miami will determine the viability of a secured creditor claim during the automatic stay. They can additionally seek protection payments that aim to prevent equity declines. Legal professionals will work diligently for their clients, monitoring the situation and progress of the bankruptcy claim.
Some courts may dismiss a debtor’s bankruptcy filing should they fail to comply with deadlines and other requirements. If this occurs, creditors can then freely and legally engage in collection activities.
Creditor Bankruptcy Representation in Miami | The Law Offices of Paul A. Humbert, P.L.
Although creditors may face juggling multiple legal scenarios across various accounts they manage, attorneys dedicate their time and effort to ensure a proper, smooth progression with the client’s best interests in mind.
The Law Offices of Paul A. Humbert, P.L. brings a comprehensive understanding and extensive experience in debtor bankruptcy situations to the table in representing our creditor clients. Our team relies on insights gained over the court of representing various small businesses and larger banks and other corporations.
For this reason, our creditor bankruptcy representation in Miami is crucial to a positive outcome in dealing with troublesome debtor bankruptcy claims. To learn more, reach out to our dedicated attorneys today!
