Bankruptcy - Creditors' Rights and Adversary Proceedings


Creditors often receive notice of bankruptcy case filings and assume they have lost all rights to collecting on specific debts owed to them. Creditors in bankruptcy possess enforceable rights so long as the correct steps are followed. Creditors in bankruptcy are repaid according to their priority and share in all disbursements made to the estate so long as an allowed claim has been filed and filed in a timely manner. Some debts are non dischargeable in bankruptcy.

 

If you feel you have a claim against a Debtor to contest their discharge you must consult with an attorney immediately as the timelines provided by the bankruptcy court are extremely short. The most common adversary proceedings filed are complaints to determine the dischargeability of certain debts and complaints to determine the extent and validity of liens.


Frequently Asked Questions

 

As a creditor, what do I need to know about the bankruptcy?

 

    1. Stop all collection attempts. Attempts in collecting debts in a bankruptcy can be construed as a violation of the automatic stay and can result in a lawsuit against you.

    2. File a Proof of Claim with the court.

    3. Consider the security of your claim. Having a secured claim against a debtor's property allows a creditor certain rights to the collateral which their lien is secured to.

    4. Consult an attorney on the viability of your claim and the approximate fees associated with its collection.

 

If I hold a lien on a debtor's property can I foreclose without court permission?

No! You must file a motion for relief from stay and obtain an order granting relief before you can foreclose on a Debtors property.

 

If I believe my claim is nondischargeable do I have to file an adversary proceeding?


Yes, if you feel your claim is non dischargeable you must file an adversary in order to preserve your rights to sue after the bankruptcy case has been discharged or closed.