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When someone owes you or your business money, whether or not that debt has been reduced to a final judgment, it is important to quickly consult bankruptcy counsel to navigate the complex obscurities of the bankruptcy code and rules of procedure. At Law Offices of Paul A. Humbert, P.L., we can guide creditors through the bankruptcy process and ensure a greater likelihood of meaningful recovery. Below is a list of just some of the services our firm can provide to creditors facing a debtor in bankruptcy.

Creditor Bankruptcy Representation

Filing Proof of Claim

If a creditor (whether secured or unsecured) has a claim against a debtor who has filed for bankruptcy (whether the bankruptcy is a Chapter 7, 11, or 13), the creditor is entitled to file a proof of claim in the bankruptcy case to show that the creditor has a valid claim against the bankruptcy estate. If the amount of the claim is already liquidated, then the claim is filed for this amount. But there are times when the claim is unliquidated and needs to be determined/litigated by the bankruptcy court, or sometimes the parties will allow the state court to decide (if, say, the matter is already being litigated in state court). If the claim is ultimately allowed by the bankruptcy court, and there is a distribution in the case, then the creditor will be paid on a pro-rata basis. There are certain claims that are entitled to superiority over others, and this may affect when, and how much, the creditor is paid. If you are a creditor and do not file a proof of claim, you will not get paid through the bankruptcy and your claim against the debtor will likely be discharged/wiped away. Also, a creditor must keep in mind that there are time limitations associated with filing a proof of claim. Failure to strictly abide by these deadlines can result in the forfeiting of your right to recover funds from the debtor’s bankruptcy estate. Late filed proofs of claims are very rarely paid, as they are treated as a subordinate class to timely filed proofs of claims of general unsecured creditors. This means all other creditors have to be paid in full before the late filled claimant can be paid a penny. Some exceptions do exist, but they are rarely applicable and immediate attention must be paid to the proof of claim deadline set by the bankruptcy court.

Obtaining Relief from Automatic Stay

Almost always, an automatic stay is imposed when a debtor files for bankruptcy – meaning all collection efforts must immediately stop. In many instances, a creditor will need to obtain relief from the automatic stay pursuant to 11 U.S.C. § 362, through the bankruptcy court, in order to take action against the debtor or property of the debtor’s bankruptcy estate. There can be grave consequences against a creditor who continues pursuit of a debtor after the debtor files for bankruptcy, including sanction by the bankruptcy court.

Pursuit of Discharge and Non-Dischargeability Actions

Debtors file for bankruptcy with hopes of receiving a discharge. Creditors have certain means to block the debtor’s discharge (controlled by 11 U.S.C. § 727) and/or the dischargeability of the creditor’s particular debt (controlled by 11 U.S.C. § 523). There are strict time limitations that must be abided by, which is why it is important to seek counsel upon being notified that a debtor has filed bankruptcy and listed you as a creditor.

Pursuant to 11 U.S.C. § 727, a creditor may object to a debtor’s discharge if, in sum, the debtor: concealed or destroyed property prior to bankruptcy, concealed or destroyed financial information, lied in connection with the bankruptcy case, failed to explain loss of assets, or failed to obey court orders. If the bankruptcy court grants an object to discharge, the debtor remains liable on every debt (as if the bankruptcy case was never filed).

Pursuant to 11 U.S.C. § 523, a creditor may object to the dischargeability of its particular debt if the debtor obtained money, property, services or an extension or renewal of credit by false pretenses. An example of a possible dischargeability action is if money is lent to a debtor, who provided a false financial statement or tax return as an inducement for the loan to be made by the creditor. The particulars of 11 U.S.C. § 523 are in depth and beyond the scope of this discussion. However, the important point to remember is that immediate attention must be given when someone who owes you money files for bankruptcy. That may involve consultation with an attorney early on in the process, to ensure a valid complaint objecting to dischargeability of debt can be filed before any deadlines expire.

Objections to Confirmation

In a Chapter 11 and 13, the debtor proposes a plan that needs to be confirmed by the bankruptcy court. There may be certain reasons why a creditor does not agree with the plan and wants to stop it from being confirmed. For example, if the creditor is not being paid in full (or at all), or is not being treated equally with similarly situated creditors, the creditor may need to file an objection to the debtor’s plan.

Dismissal of Bankruptcy for Bad Faith Filing

There is rampant abuse of the bankruptcy system and a debtor may file for bankruptcy numerous occasions, simply to thwart the collection efforts of an active/aggressive creditor. This type of behavior must be brought to the bankruptcy court’s attention. Additionally, there are other reasons the filing may be considered bad faith, and it is important to explore these grounds for dismissal at the onset of a bankruptcy.

2004 Examination of Judgment Debtor

Within a bankruptcy case, a creditor is entitled to take the deposition of the debtor. The process is similar to depositions in a traditional state court post-judgment sense, but Rule 2004 of the Bankruptcy Rules of Procedure offers tremendous latitude for the creditor. Creditors are allowed to examine the debtor concerning many facets of the debtor’s finances. This can be useful to determine if fraudulent transfers occurred between the debtor and third parties prior to the debtor filing bankruptcy.

Adversary Proceedings and Contested Matters

Adversary proceedings are often brought by the trustee in a chapter 7 bankruptcy (or a debtor in possession in a chapter 11) but can also be brought by aggrieved creditors. Fraudulent transfers by a debtor shortly before filing bankruptcy would be an impetus for a trustee filing an adversary proceeding against third party transferees of the debtor. Procedurally, objections to discharge and/or dischargeability are also brought through the opening of an adversary proceeding and filing of a complaint. Contested matters, although similar to adversary proceedings, do not require the filing of a separate lawsuit, but rather are litigated in the underlying bankruptcy case. An example of a contested matter is a debtor or trustee’s objection to the proof of claim filed by a creditor. Different bankruptcy courts throughout the country have varying local rules on the procedures governing contested matters, but the bankruptcy code and bankruptcy rules of procedure set forth the framework governing contested matters.

Bankruptcy Appeals

Bankruptcy appeals are more complicated than traditional appeals. This is because jurisdictionally, there can be multiple levels of appellate courts, including an appeal to a bankruptcy appellate panel or local district court, prior to appealing to the circuit court of appeals. In the Eleventh Circuit Court of Appeals (which Florida falls under) bankruptcy appellate panels do not exist, and an appeal from the bankruptcy court often goes to the local federal district court. The exception would be if the appeal goes directly to the circuit court of appeals, but this requires the consent of the parties.

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