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Bankruptcy and Creditors’ Rights

The deck seems to be stacked against you and there is nothing you can do. This is not necessarily true. The New Mexico Financial Law represents creditors as well as debtors in bankruptcy proceedings. Although the primary purpose of bankruptcy is to allow people in untenable financial straits to shed themselves of debt and be able to start over – if not debt free (Chapter 7 Bankruptcy) then at least with either reduced debts or an extended term in which to pay back debt (Chapter 13 Bankruptcy) the law does protect creditors from debtors engaging in defalcation (a term used by the United States Bankruptcy Code to describe a category of bad acts that taint a particular debt such that it cannot be discharged in bankruptcy) and other improper actions prior to or during a bankruptcy claim.

Being A Creditor In A Debtor’s Bankruptcy Proceeding Is An Uncomfortable Place To Be!

Creditors do have rights in bankruptcy proceedings. New Mexico Financial and Family Law can both explain your rights in detail and assist you in asserting those rights in court. If you are a creditor in a bankruptcy proceeding you have a limited time in which to make your claims against the debtor so contacting us sooner rather than later is advisable.

Creditors in bankruptcy are entitled to:

Share in any distribution from the bankruptcy estate according to the priority of their claim. Most unsecured, non wage claims come low in the priority scheme, and may receive little or nothing.

  • Be heard by the court in matters concerning the debtor’s plan (in chapters 11, 12, and 13), the liquidation of the debtor’s nonexempt assets, and payments from the assets of the estate.
  • Challenge an individual debtor’s right to a discharge or to discharge the creditor’s particular debt.
  • Insure that the collateral securing valid liens is protected and to get paid at least the value of the lien plus a reasonable interest rate.

Bankruptcy – Priority of a Claim

The Bankruptcy Code establishes the order in which claims are paid from the bankruptcy estate. All claims in a higher priority must be paid in full before claims with a lower priority receive anything. All claims with the same priority share pro rata (proportionally).

Priority claims are claims that are not secured by a lien and include certain debts, such as unpaid wages, spousal or child support, and taxes are elevated in the payment hierarchy under the Code. Priority claims must be paid in full before general unsecured claims are paid.

Priorities: Priority refers to the order in which unsecured claims in a bankruptcy case are paid from the money available in the bankruptcy estate. Claims in the higher priority are paid in full before claims in a lower priority receive anything.

Within a class, creditors share the available funds in proportion to the size of their claim.

Creditors’ Rights follow an order of payment, as set out in the bankruptcy code, is as follows:

  1. Claims for debts to spouse or children for court ordered support
  2. Administrative expenses of the bankruptcy
  3. Unsecured, post petition claims in an involuntary case
  4. Wage claims of employees and independent salespersons up to $4300 per claim
  5. Contributions to employee benefit plans up to $4300 per employee
  6. Claims of farmers and fishermen against debtors operating storage or processing facilities.
  7. Layaway claims of individuals who didn’t get the item they made the deposit on
  8. Recent income, sales, employment or gross receipts taxes
  9. Commitments to maintain the capital of a bank or savings and loan

In the case of an individual debtor, some of these kinds of claims are also non dischargeable in Chapter 7, such as support and taxes.

Secured claims are paid from the proceeds of the collateral, or over time based on the value of the collateral plus a reasonable interest rate; if the collateral is insufficient to pay the claim in full, the balance becomes an unsecured claim. However, if you have a valid lien that is secured by valuable property, that is the best position to have in a bankruptcy case.

Clearly it is important that your claim as a creditor is properly presented so as to achieve the highest priority in the bankruptcy claims list. New Mexico Financial and Family Law is available to assist creditors in identifying those claims which can be filed and to properly present then to the bankruptcy court so that they can achieve the highest possible priority. New Mexico Financial and Family Law can also assist creditors in contracting qualified investigators, if necessary, to make sure that the debtor is not hiding information about their personal assets or debts.

Bankruptcy – Court Hearings

Bankruptcy court is designed to hear cases quickly. There are two excellent federal bankruptcy judges in New Mexico. Even a very complex matter can go from filing the case to a trial in less than one year, when the same issue would take two to four times as long in other courts. The New Mexico bankruptcy court strives to be one of the most technologically advanced and consumer oriented courts in the country. The judges accommodate parties and their attorneys by allowing most preliminary matters to be heard very quickly, often within weeks of requesting a hearing, and by allowing the attorneys to freely appear by telephone. Unlike most matters in state and federal court, bankruptcy court is considered a “court of equity,” and jury trials are almost unheard of. Once a matter gets set for a “final hearing,” that is a trial, the federal bankruptcy judges are very formal, very professional, and hold the parties and the lawyers to a very high standard. New Mexico Financial and Family Law has a proven reputation before the New Mexico judges and has a good success record in achieving the best possible results. Federal Bankruptcy Law, is complex and you need a strong advocate. You should see us as early as possible if you believe you will need to be litigating in bankruptcy court.

Bankruptcy – Protecting Your Rights

When a person files for personal bankruptcy protection (Chapter 7 or Chapter 13), they are automatically entitled to a “stay” against certain creditor actions (harassment). This stay isn’t always applicable, but it can prevent creditors from foreclosing on the debtor’s primary residence and garnishing their wages. Also, bankruptcy stays can end attempts by creditors to possess the debtor’s car or other property that is secured by a lien. Moreover, the automatic stay can stop any creditor lawsuits and prevent creditors from continuing to bill the debtor, sending collection agencies, or calling the debtor at home or at work.

All that said, if the debtor’s attorney does not protect the debtor, does not give the debtor good advice prior to filing for bankruptcy, or the debtor engages in other prohibited activity, these creditor protections can go away. For instance, if a debtor engages in a process called defalcation or attempts to rack up large purchases on credit or engage in a large-scale loan agreement in the period just prior to a bankruptcy filing, creditors can attempt to nullify the bankruptcy, thus ending the automatic stay and allowing for further creditor actions (harassment).

Given the above, there are certain secured creditors who can continue to request money from debtors or solicit funds even after the debtor has gotten a bankruptcy discharge. For instance, the debtor may still be obligated to make good on student loans, child support payments, secured debts, or settlements from injuries that were willfully caused by the debtor.

New Mexico Financial and Family Law can help creditors understand the nuances of bankruptcy law and creditor rights. You can contact the firm by clicking here. Many debtors do not follow their bankruptcy attorney’s advice about how to enact the filing, and accidentally create legal paths for creditors to continue pursuing debtors or to nullify their claims.

New Mexico Financial and Family Law is an Albuquerque New Mexico based bankruptcy law firm which provides United States Bankruptcy legal services and advice throughout the state. The majority of its clients reside in the Albuquerque, New Mexico, area, i.e., Albuquerque, Bernalillo, Rio Rancho, Los Lunas and Belen. But the firm can also represent clients statewide in Hobbs, Las Cruces, Clovis, Farmington and other New Mexico cities. The firm represents clients who reside in New Mexico and also New Mexico residents residing in out-of-state jurisdictions. Bankruptcy law, as practiced by New Mexico Financial and Family Law addresses all of a client’s concerns; legal, financial, and emotional. The firm attempts to settle bankruptcy cases through negotiation. If negotiation is unsuccessful then the trial skills of pur attorneys are brought into play. Don Harris is a well-known and respected Albuquerque, New Mexico, lawyer. New Mexico Financial and Family Law not only provides the legal bankruptcy advice and guidance expected of experienced lawyers, we also work with other professionals such as financial advisors, CPAs and mental health counselors to provide the firm’s clients with many of the services needed to get through their financial and personal challenging times.

The hiring of a lawyer is an important decision that cannot be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience.

Contact New Mexico Financial and Family Law Today for a Free Initial Bankruptcy Consultation!

Pursuant to 11 U.S.C. §528(A)(4) We are required to state the following: We are a debt relief agency. We help people file for Bankruptcy relief under the Bankruptcy Code.

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    New Mexico Financial Law, PC

    320 Gold Ave, SW
    Suite 1401
    Albuquerque, NM 87102

    (505) 503-1637

    IMPORTANT: Free consultations only apply for Chapter 7 and Chapter 13 bankruptcy, or similar.