Are you a creditor wondering what your options are in a bankruptcy case? Creditors (a person or entity who has a right to payment from a debtor) have options and methods to respond to a bankruptcy case but should always seek the advice of experienced counsel since their rights are fairly complex. Many creditors give up recovering their money upon discovering that a bankruptcy was filed. Let’s look at non-dischargeable debts and what they mean for the creditor.
Non-dischargeable debts – This type of debt cannot be eliminated through bankruptcy proceeding. Such debts include, but are not limited to, student loans, most federal, state and local taxes, money borrowed on a credit card to pay those taxes, and child support and alimony. A creditor may seek a judgment to keep his claim or debt from being discharged. A complaint must be filed with the bankruptcy court within 60 days from the first date set for the creditor’s meeting. In general a debt must fall into one of the following categories: the debt was obtained through fraud, the debtor embezzled assets, or the debtor is liable for injury to the creditor or his property. The creditor has the option to object to the discharge by filing a complaint in the bankruptcy court.
The bankruptcy system also requires that a debtor pay off as many debts as possible. Thus, creditors have a right to get a portion of whatever is distributed from a bankrupt estate. Whether or not a creditor will recover mainly depends on what priority the creditor’s claim has. Highest priority claims are secured debts and lowest are unsecured debts. If you are a creditor and have just received a notice of bankruptcy, you should contact an attorney. A lawyer will be able to tell you whether your debt is secured or unsecured, what you are likely to recover, and if you decide to file a lawsuit an experienced attorney will be able to help you file your lawsuit in a timely manner.