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Protecting creditors’ rights in bankruptcy – part 1

Last fiscal year there were almost 800,000 new bankruptcy filings in the US

While bankruptcy numbers have dropped significantly since the depths of the Great Recession (and even by 28% since 2013), bankruptcy still affects the lives of millions of Americans. (1) When many people think of the suffering caused by bankruptcy, they think of the damage it causes to a debtor’s credit, or perhaps the harassing collection calls it allows them to escape. But what about the creditors? Where’s the sympathy for the people on the other end of the bankruptcy equation; the people who never see the money they’re owed? Let’s talk about creditors’ rights.

Who fights for creditors’ rights? New Mexico Financial Law does.

All too often a creditors receive a notice of bankruptcy and think it’s the final word in the matter. However, creditors have rights too, and there are several elements to consider about your debtor’s claim from a legal point of view.

What are a creditor’s rights in a bankruptcy proceeding?

  • Creditors are entitled to a share of the bankruptcy estate’s assets. How much they will receive is determined by the priority of their claim.
  • Creditors have the right to have their voice heard by the court when it comes to the debtor’s repayment plan (in a chapter 11 or 13 filing), the handling of payments from the bankruptcy, and the sale of non-exempt assets.
  • Creditors have the right to challenge a bankruptcy discharge under certain grounds.

What should you do if you receive a notice of bankruptcy?

  • First and foremost, you should speak with a qualified bankruptcy attorney to ensure your rights and interests are protected.
  • Cease all collection actions. Debtors are protected from collections during the bankruptcy process. This is called an automatic stay. In chapter 13 bankruptcy filings, the automatic stay also protects co-debtors.

Check back soon for Protecting creditors’ rights in bankruptcy – part 3

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