If you receive notice that a customer or client has filed for Chapter 7 bankruptcy relief, there are certain things you need to know about the bankruptcy process. First, you should cease any pre-petition collection efforts. The automatic stay afforded by the bankruptcy filing stays any action to collect against pre-petition claims or exercise control over bankruptcy estate property. For this reason, if you are a secured creditor and are not interested in the Debtor entering into a reaffirmation of the debt securing your collateral, then a motion for stay relief is needed before you can exercise any rights and remedies against the collateral. If you are seeking relief from the automatic stay, you should file a proof of claim in the case and attach an itemization of the sums due and proof of loan or other security documentation and perfection of your lien.
If you are an unsecured creditor, you will only need to file a proof of claim if the case is designated as an “asset case” which means the Chapter 7 Trustee appointed to the case has identified assets that can be liquidated to make a distribution to unsecured creditors. It is very important to read all mail and other notices regarding the bankruptcy as such notices contain important deadlines such as the deadline to file proof of claim or file a non-dischargeability action or the date set for the meeting of creditors. As a creditor, you can attend the meeting of creditors and ask the debtor relevant questions regarding debts and assets. You can obtain legal counsel to represent you in the case if you choose. You will want to verify the debtor actually receives a discharge in the case. Debtors can face non-dischargeability actions that bar discharge of certain debts or a discharge in general. If the debtor incurred credit with you through a false financial statement or converted your collateral or engaged in other wrongdoing, you may want to pursue a non-dischargeability action so that your debt survives the bankruptcy.
About DelCotto Law Group
DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy, complex litigation, and estate planning. For more information about filing bankruptcy or DelCotto Law Group, please call (859) 231-5800 or email [email protected].