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Creditors Claim In Bankruptcy
| Most people would assume that they have no rights to pursue their debts, if the debtor claims bankruptcy. This is not entirely true. Even if one may claim bankruptcy, creditors are still entitled to the following. |
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- Share in any distribution from the bankruptcy estate according to the priority of their claim.
- The right to be heard in court regarding the liquidation of the debtor, payment from the assets of the estate.
- The creditor has right to challenge debtor’s right to discharge creditor’s particular debt.
What should a creditor do?
- The law regulates that the creditor must immediately stop any collection action. This is including telephone call, fax, or email. Debtor is protected by automatic stay in Chapter 13.
- File a claim with the court. The notice of the bankruptcy will tell you when and where to file a proof of claim. Make sure that you don’t miss it. Try to determine if your claim is dischargeable. For instance, there are some non-dischargeable claims like divorce debts, damages from drunk driving, or debts from fraud.
- Is your debt secured? Secured debt has better odds from getting relief from the automatic stay. Unsecured debt usually has very low priority in debt claims. Therefore, creditors may receive nothing or very little.
- Consult with your trustee. In many cases, debtors will try to conceal and transfer their property. If you find yourself in that situation, contact trustee to challenge the debtor’s right to a discharge.
- It is possible for bankruptcies to be dismissed, because some debtors fail to comply with the requirements of the Code. Therefore, it is important to monitor the progress of your debtor’s case. Creditors are allowed to pursue collection, if the bankruptcies are dismissed.
- Statute of limitations gives creditors a certain time period debtor a debt. The time period may be varied by the state. Sue before your time run out.
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