What rights and remedies does a creditor have in the bankruptcy case?
A creditor has the basic right to receive a fair share of your
non-exempt assets in a Chapter 7 case and to be treated fairly in a
Chapter 11, 12, or 13 case. A secured creditor (i.e., one who has a
lien on your property to secure the debt you owe) has a lien on the
property that secures the debt.
Certain debts are not discharged
in bankruptcy. A creditor holding such a debt may (and sometimes must)
commence an "adversary proceeding" before a court-established deadline
(usually about 60 days after the 341 meeting or first meeting of the
creditors) to obtain a ruling that the debt will not be discharged.
In
a "no-asset" Chapter 7 case, there are no non-exempt assets. Most
unsecured debts will be discharged. Therefore, the only creditors who
will actually participate in the case are the ones who hold security.
They may file motions for relief from the automatic stay in order to
foreclose on their loans or repossess the property securing the loans.
The court generally holds a hearing on such a motion at which the
debtor can contest the proposed action.
In an "asset" Chapter 7
case, there are non-exempt assets that the trustee will sell. The
trustee will deduct a fee for his services and distribute the remainder
among your unsecured creditors based on a priority scheme contained in
the Bankruptcy Code. Creditors will be told to file proofs of claim
with the court in order to participate in this eventual distribution.
Properly filed claims are presumed to be accurate, which means that the
creditor need not actually prove you owe a debt unless someone objects.
In
cases under other chapters of the Bankruptcy Code, the debtor must look
out for his/her own interests when it comes to claims by creditors.
Creditors may file claims, and it will be up to the debtor to object if
the claims are not accurate.
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