What to do when someone who owes you money files bankruptcy

Serving Waukegan, Libertyville, Lake County, Gurnee & nearby areas of Illinois

Despite recent reforms to bankruptcy law, many people still deal with job loss and financial problems caused by the now years long financial crisis by filing for bankruptcy.  We are frequently asked by creditors (those who are owed money by the bankrupt) how to proceed once they get notice of the bankruptcy filing.  In many cases, the creditor has no recourse.  However, if a creditor feels that the debtor has not been altogether honest, they can challenge the validity of the petition. These circumstances include:

  • a debtor not revealing all assets;

  • a debtor giving away assets prior to filing for bankruptcy;

  • a debtor supplying false and/or misleading information at the time they obtained credit; and

  • a debtor not complying with the requirements of the bankruptcy code.

In these situations, a creditor should seek legal advice and legal representation. A bankruptcy petition can be dismissed if any of these circumstances exist, allowing the creditor to pursue the debtor for full payment of monies owed.


 

A lawyer can also help to ensure a creditor does not violate bankruptcy law. This includes:
  • complete cessation of collection activities or obtaining court permission to try and collect in some instances

  • submitting a correct claim to the court

  • ensuring a creditor meets time lines – these are very tight and stringently enforced

  • determining whether a debt is secured or unsecured

  • sharing relevant information with the appointed trustee
These are all necessary if a creditor wishes to obtain their share of any proceeds collected through the bankruptcy process or to recover collateral on a secured claim.  While it heavily favors debtors, it is also designed to protect creditors.  Contact us if you need help responding to a bankruptcy filing that affects you.