My practice represents both debtors and creditors, and often the creditors (especially the smaller ones) are unclear on the process for their end when someone who owes them money files New York bankruptcy. It’s fairly straightforward, and there are definitely circumstances in which it helps to hire a lawyer.
(1) Usually the first thing that happens is the bankruptcy court will send you a notice in the mail informing you that the debtor has filed his or her petition. At this point the first thing not to do is try to contact the debtor to collect what you are owed. Do not violate the automatic stay. If you know of the bankruptcy but haven’t received a notice (and it’s been a while) one thing you can do is request a copy of the petition from the bankruptcy court to see if you are named as a creditor. You can object if you are not, but it might not be worthwhile if your debt is unsecured, non-priority, and likely to be discharged.
(2) The notice should tell you when and where the meeting of the creditors (the 341 meeting) will take place. It’s not necessary for you to attend.
(3) Not all creditors are the conventional loan-you-money types. One common type of creditor is an employee or former employee at a company. You might be owed wages for work you have performed or your pension might be affected. Usually, your pension fund will handle the case on your behalf, but sometimes pensioners might want to get involved if the case will result in a reduction in pension obligations. This kind of thing is common in chapter 9 cases filed by municipalities, like Detroit, Michigan.
(4) You will also receive a proof of claim, which is discussed here from the debtor’s perspective. You can fill out the form and list how much money the debtor owes you. Some creditors whose claims haven’t fully matured, like unfinished tort claims, should consult with a bankruptcy lawyer to discuss the situation.
(5) It can definitely be helpful to hire a bankruptcy attorney to aid in filling out the proof of claim if it is likely to be complicated. A poorly completed proof of claim can lead to a reduced distribution from the bankruptcy estate.
(6) Speaking of which, make sure you know how much the debtor has paid you recently in case the trustee considers pursuing it as a preference payment. Hiring a New York bankruptcy lawyer can help protect payments made by the debtor from the trustee.
Most creditors who aren’t banks don’t have a lot of money owed to them. However, hiring an experienced bankruptcy lawyer can be a boon if you think there’s any reason you can enforce payment from the debtor. For example, you might want to file an adversary proceeding to prove the debt owed to you is nondischargeable, or you might want a lawyer to help you if the debtor wants to strike a reaffirmation agreement with you.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced fair debt collection practices act Bruce Weiner for a free initial consultation.
