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Bankruptcy and Creditors’ Rights
Being A Creditor In A Debtor’s Bankruptcy Proceeding Is An Uncomfortable Place To Be!
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
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:
- Claims for debts to spouse or children for court ordered support
- Administrative expenses of the bankruptcy
- Unsecured, post petition claims in an involuntary case
- Wage claims of employees and independent salespersons up to $4300 per claim
- Contributions to employee benefit plans up to $4300 per employee
- Claims of farmers and fishermen against debtors operating storage or processing facilities.
- Layaway claims of individuals who didn’t get the item they made the deposit on
- Recent income, sales, employment or gross receipts taxes
- 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 – Protecting Your Rights
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.
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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.