This page contains general information. Call us at (715) 832-1800 for specific advice.
A debtor in bankruptcy seeks to wipe out or change the repayment terms of debt. Creditors faced with a bankruptcy must meet several key deadlines to protect their rights. So if you receive a bankruptcy notice then you should consult a lawyer as quickly as possible.
Automatic Stay. A bankruptcy filing creates an automatic injunction. The stay stops collection action and is quite broad. In some cases it even forces creditors to give repossessed collateral back to the debtor. Creditors can ask the bankruptcy judge to grant relief from the stay. If the court does give you relief then you can resume collection. But courts rarely grant stay relief to unsecured creditors.
Meeting of Creditors. The bankruptcy notice will set a date and time for a “meeting of creditors.” Creditors are not required to attend this meeting, and most choose not to attend. Creditors who do attend are given a brief chance to ask the debtor questions about the debtor’s financial affairs.
Proof of Claim. In Chapter 7, Chapter 12, and Chapter 13 cases a creditor must file a “proof of claim” to receive a payment. Chapter 7 trustees usually make no payments to creditors. The bankruptcy court will send out a claim filing notice if and when a Chapter 7 trustee expects to make a payment. Chapter 12 and Chapter 13 trustees frequently make payment, so the initial bankruptcy notice will include a claim filing deadline.
In Chapter 11 cases a creditor’s claim is automatically filed if the debtor lists the claim as undisputed. After receiving a notice of a Chapter 11 case a creditor should check the listing of the creditor’s claim and file a proof of claim if the debtor lists the claim incorrectly or shows it as disputed.
Plan. In Chapter 11, 12, and 13 cases the debtor will propose a plan. If the court confirms the plan then the plan will set new terms by which the debtor will pay (or, perhaps, not pay) creditors. So creditors should read a debtor’s plan carefully and promptly contest the plan if the terms are unfavorable.
Discharge. The bankruptcy “discharge” is a permanent injunction against creditor efforts to collect pre-bankruptcy debts. Mortgages, security agreements, and other liens ordinarily survive the discharge. So a creditor holding a discharged debt may still be able to foreclose real estate or repossess collateral.
Certain debts are automatically excepted from the discharge, others are excepted only if the creditor timely seeks a determination of the dischargeability of the creditor’s debt.
In Chapter 7 cases the debtor may voluntarily “reaffirm” a debt, excepting the debt from the discharge. To be valid, a reaffirmation agreement must meet complex statutory requirements.
Preferences. A bankruptcy trustee, or even a debtor, may ask a creditor to give back a payment received from a debtor before the bankruptcy began. The creditor may legally resist this request under certain circumstances.
Please call us at (715) 832-1800 if you receive a bankruptcy notice and would like our assistance.