Your Virginia Hometown Lawyer

By: Sarah Saville

Ever loaned money to a friend? Are you a landlord or have a roommate? Does someone pay you child or spousal support payments? You may not think of yourself as a “creditor”, but if the person who owes you money files bankruptcy, you will be a creditor in bankruptcy. Here’s 3 things to know when that person files bankruptcy:

 

• STOP in the Name of the Automatic Stay!

The moment a person files bankruptcy, an automatic stay is issued and all collections activities must come to a screeching halt. That means no phone calls, no notices, no court actions, no texts or tweets or communications of any kind to the debtor about any contract or debt owed before the bankruptcy was filed. Although the stay has limitations, violating the stay is a punishable offense, so it’s best to consult with an attorney before taking any action.

 

• Know the Chapter

The most common bankruptcy is Chapter 7, in which the debtor’s non-exempt assets - if any - will be paid to their creditors. In a Chapter 13, the debtor makes monthly payments under a 3-5 year plan. In all Chapter 13 and Chapter 7 – Asset bankruptcies, creditors must file a proof of claim to be paid through the bankruptcy. Mark the claim deadline on your calendar as soon as you learn there’s a bankruptcy so that you don’t miss it!

 

• Know the Debt

Is your debt secured? Are there monthly payments that will accrue after the petition is filed? Can the debt be discharged? These factors will determine your rights as a creditor. If your debt is secured, your lien may survive the bankruptcy. If a debtor fails to make ongoing monthly payments, the court may give you relief from stay to collect the debt. Some debt may not be discharged in a bankruptcy. That means you will be allowed to pursue the debt after the bankruptcy is over. Understanding how the bankruptcy will affect your debt can help you plan for protecting your rights as a creditor.

 

This entry was posted on Tuesday, May 30th, 2017 at 2:19 pm and is filed under Bankruptcy, Debt Collection, Family Law, Landlord - Tenant. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.