WE CAN HELP YOU MONITOR YOUR RECEIVABLES AND PROTECT YOUR RIGHTS IN BANKRUPTCY PROCEEDINGS.

Creditors’ Rights in Bankruptcy

Our bankruptcy team only represents creditors.  We are knowledgeable in the ever-changing bankruptcy laws and are familiar with the local rules and customs of each division within the three district courts in Louisiana.  

Creditors have many rights, including the right to have their questions answered at the meeting of creditors (341 meeting); have their claims heard in Chapter 7 distributions; have their claims heard in Chapter 13 debt restructuring and repayment plans; and initiate adversary proceedings to contest the dischargeability, seek enforcement of repossession or foreclosure, or contest fraudulent transfers of property.

Types of Bankruptcy

Chapter 7 bankruptcy is involves liquidating the debtor’s non-exempt assets to pay off creditors.  Chapter 7 is the most common type of bankruptcy.  It incorporates a “means test,” and people who fall under a certain income level are able to eliminate their debt while protecting their most important assets through exemptions.  Exemptions are the assets that a debtor gets to keep in bankruptcy, according to Federal and State laws.

Chapter 13 bankruptcy involves the reorganization of debt for individuals and sole proprietorships.  Rather than liquidating assets, Chapter 13 bankruptcy allows individuals to restructure and repay their debt over the course of a few years (typically 5) in a repayment plan.  It provides relief for debtors who earn too much to qualify for Chapter 7 or who want to protect certain property they might lose in a Chapter 7.

Chapter 11 is also a reorganization bankruptcy.  It is typically used by businesses to reorganize debt and repay creditors rather than liquidate.  This allows them to remain in business while going through bankruptcy.

Secured Claims vs. Unsecured Claims

Secured creditors are those who have a legal claim to property that is put up as collateral on a loan.  Collateral can be a house in a mortgage or a car in an auto loan.  Secured claims could also include judgment liens.

Unsecured creditors are those who are owed a debt that is not back by collateral.  These typically include credit card debt, personal loans, and medical bills, among others.

Secured creditors have priority over unsecured creditors. This means that when assets are limited to pay all debts, secured creditors will get paid first.

What is a Trustee?

As soon as a debtor files a petition to initiate bankruptcy proceedings, their assets are placed in a bankruptcy estate.  Each district has a Chapter 7 trustee and a Chapter 13 trustee that administers the bankruptcy estate.  In a Chapter 7, the trustee gathers the assets, assesses creditor claims, sells the assets, and distributes the assets according to priority.  In a chapter 13, the trustee assesses the debtor’s repayment plan, determines whether the plan is feasible, collects the debtor’s payments, and distributes those payments to the creditors.

Common Creditor Filings

Proof of Claim

Both secured and unsecured creditors must file a proof of claim in Chapter 7 and Chapter 13 cases within 70 days after the petition is filed.  The creditor must provide certain information to prove the claim, including the amount of the debt, the basis for the claim, and whether the claim is secured or unsecured.  If the amount includes interest, an itemization of the balance must be attached.  The creditor should also attach loan documentation to support the claim but must be careful to adhere to the redaction rules.

Objection to Confirmation

In Chapter 13 cases, creditors have a chance to review the proposed repayment plan.  If the creditor feels it is not being fairly treated by the plan, they can file an objection and present their reasons to the court at the confirmation hearing.  Common objections are related to how debtors “cramdown” their secured debts.  Debtors are allowed to “cramdown” certain debts so that they pay the lesser of the loan balance or the fair market value of the collateral.  Naturally, debtors often undervalue the collateral.  Also, if the loan was taken less than 910 days prior to the filing of the petition, they are not allowed to “cramdown” the debt and the full loan balance is owed.

Motion to Lift Stay

When a debtor files for bankruptcy, they are granted an automatic stay from legal actions.  Creditors can request relief from the stay in an adversary proceeding in certain circumstances.  This is generally done for cause.  Cause can exist for a number of reasons but is most common when a debtor quits making their home or auto payments, fails to insure the collateral, is unable to fund a Chapter 13 plan, or when a debtor wants to surrender property.

Objection to Discharge

In a Chapter 7 case, creditors can file an objection to the discharge within 60 days of the creditors’ meeting.  The creditor must file an adversary proceeding asking the court to find that the obligation is non-dischargeable.  Non-dischargeable debt may include large credit card charges up to 90 days before the bankruptcy petition is filed; cash advances of at least $1,000.00 up to 70 days before the bankruptcy petition is filed; and debts obtained through fraud, misrepresentation, or false pretenses.

The creditors’ rights lawyers at Bowes, Petkovich & Palmer, LLC are experienced at representing lending institutions in bankruptcy proceedings and protecting their rights after a debtor files for bankruptcy protection.  We represent creditors in the New Orleans area and across Louisiana.  Call us today for a free consultation.

Useful Resources:

FDCPA Compliance

 

Other Creditors’ Rights:

Consumer Collections

Commercial Collections

Repossessions 

Foreclosures

Deficiency Judgments

Evictions