Bankruptcy allows people with significant debt to pay, settle and discard various claims. Debtors who file for bankruptcy must pay certain creditors and may have to liquidate assets.
If you are a creditor, you should know your rights if someone who owes you files for bankruptcy. Fortunately, there are legal actions you can take to ensure you receive a fair outcome.
Debts that do not have ties to collateral are usually unsecured claims. These debts are a lower priority in bankruptcy cases. Unsecured claims can be difficult to recover. You should review any bankruptcy documents to note issues and inaccuracies. As a creditor, you have the right to file an objection to discharged claims. You can also go to a creditors’ meeting and file a proof of claim.
You have a secured claim if you have collateral, a deed of trust, or a lien. Mortgages and car loans are common secured claims. You can receive ownership of collateral or equivalent payment from a debtor when you have a secured claim. Furthermore, the court typically prioritizes secured claims.
Payment terms can differ depending on the type of bankruptcy. When a debtor files for Chapter 7 bankruptcy, the court assigns a trustee to liquidate assets and pay creditors. In Chapter 13 bankruptcy, a debtor can retain assets but must comply with the court’s plan to repay certain debts.
Bankruptcy can present difficulties for creditors who are seeking payment. Therefore, if someone in debt to you files for bankruptcy, you should review the terms and evaluate your legal options.