When someone owes you or your business money, you may be doing everything in your power to legally get the funds you are owed. However, if that person files for bankruptcy, it can seriously impact you and your company. It’s important to understand what your rights are when you learn that someone who owes you funds has filed for bankruptcy. The following blog explores what you must do when notified of a bankruptcy filing and why working with creditors’ rights attorneys is critical to protecting yourself and your business.
What must I do when a debtor files for bankruptcy?
Upon notice that a debtor has filed for bankruptcy, you must immediately cease all collection efforts against the party, as they are granted protection from collection under the automatic stay. Continuing to attempt to recover the funds you deserve can constitute a violation of the automatic stay, thus rendering you liable for damages.
In addition to ceasing all collection efforts, you should begin gathering all documents related to your partnership with the client who filed. This should include all supplies or services received by the client and a full list of payments that you have received and ones that have been missed.
Next, you may need to file a proof of claim. When the debtor files for bankruptcy, it is their responsibility to list all outstanding debts and balances owed. However, if your claim is not included on that list or is listed incorrectly, you’ll need to ensure you file a proof of claim to receive funds.
Can an attorney help me fight for the funds I deserve?
Bankruptcy is a complex process for those who file and those owed. Generally, when someone files, their debt will be paid on a priority basis. However, this can vary depending on the type of bankruptcy filed. For example, if they pursue Chapter 13, this involves a repayment plan that will likely include you. However, if they pursue Chapter 7, this means the filer’s assets will be liquidated and paid based on priority. Essentially, this means that secured debts, like a mortgage, will be repaid first. Other debts can qualify for a discharge, and if this includes yours, it means the debtor will no longer be legally responsible for repaying the money owed. Additionally, you will be barred from pursuing collection for a discharged debt.
As you can see, this process can be incredibly complex. Not only do you have contractual obligations, but a client filing for bankruptcy can drastically impact your business. Working with a creditors’ rights attorney can help you fight for the funds you deserve. Not only can they help guide you through these confusing and uncertain times, but they can represent you in critical moments, like at the meeting of creditors.
At Friedman Schuman Layser , we understand how complicated these issues can be, which is why our firm is committed to helping you and your business. If you’re dealing with a client who has filed for bankruptcy, our team can assist you. Contact us today to discuss your circumstances with a member of our team today.
