Creditors who are notified a debtor filed for protection through bankruptcy are right to find themselves frustrated. Bankruptcy causes a hurdle towards getting payment — but there are situations when creditors can jump that hurdle and still get some or all of their entitled payment. The Law Offices of Alan M. Cohen & Associates LLC have several different methods that can help creditors get past these hurdles.
First, know what you are up against
It is important to know which type of bankruptcy the debtor has chosen. Due process requires the bankruptcy court notify known creditors before the discharge process can impact their claim. The government defines a known creditor as those who are either actually or reasonably known to the debtor.
Two common examples of bankruptcy options are Chapter 7 and Chapter 11. A Chapter 7 can lead to discharge, or forgiveness, of debts — meaning that if you do not act, you could lose the chance to get payment. A Chapter 11 leads to a reorganization of the debt. This can mean the debtor still has to pay certain creditors, just based on a different timeline as outlined by a court approved repayment plan.
The bankruptcy court may assign a case trustee, who will hold a meeting of creditors. This meeting provides creditors a chance to ask the debtor questions.
Next, move forward carefully
Creditors need to act wisely. Reaching out for payment after the bankruptcy court has approved a debtor’s petition for relief is not allowed, as the bankruptcy process results in an automatic stay. This is a court order that means creditors can no longer seek payment from the debtor. If the debtor is moving forward with liquidation or shutting down and selling assets to pay off creditors, creditors will need to get in line. The Bankruptcy Code has rules that guide who the trustee will pay first and those who are at the end of the line may not get payment. An attorney can review your situation and help better ensure you get the best possible priority when it comes to payment in this situation.
Creditors also often need to file a proof of claim. This is an official bankruptcy form found on the United States Courts website. There is a strict deadline to file this claim. Any creditor that fails to file by this deadline can lose their chance to seek payment.
Finally, prepare options if the bankruptcy court’s ruling does not go your way
Those who disagree with the bankruptcy court’s handling of the matter still have options. The creditor can move forward with an adversary proceeding to object to the treatment of your claim or a proposed repayment plan. The experienced commercial collection lawyers at the Law Offices of Alan M. Cohen & Associates LLC have experience with these matters and can negotiate these claims on your behalf. Contact us today by calling 508-763-6604 or sending us an email.