Creditor’s Rights

Dothan Bankruptcy Attorneys helping you navigate your creditor’s rights in Eufaula, Abbeville, Ozark, Enterprise, and all of Alabama

Individuals filing bankruptcy receive the immediate protection of an “automatic stay,” a legal force field that prevents creditors from collecting on debts until the bankruptcy is dissolved. The automatic stay can delay a home foreclosure or vehicle repossession while the debtor gets his financial affairs in order. However, creditors also have rights in the equation – under certain circumstances, they can request relief from the automatic stay and collect on the debt. When creditors get notice of the bankruptcy, their rights will depend on the nature of the bankruptcy (which Chapter), and the type of debt owed (secured or unsecured). Upon the 341 meeting of creditors, provided for in Chapter 7 of the bankruptcy code, creditors have the right to challenge or object to certain exemptions a debtor is claiming.

Also, a secured creditor may be able to file a claim for relief from the automatic stay. The creditor must show “cause” for granting the relief, which will form the basis of a hearing at which the bankruptcy judge will decide whether to grant such relief. However, this relief does not take the property outside of the bankruptcy estate or simply transfer title to the property to the creditor. It simply allows the creditor to take action to collect debts. Note that without obtaining such relief, it is illegal for a creditor to even send a letter to a debtor requesting payment.

A creditor must also determine whether the debt is dischargeable. If the debt is dischargeable, the creditor has options to try and prevent discharge of the particular debt. For example, if the debtor incurred the debt by dishonesty, fraud, or other intentional “bad acts,” the creditor may contest discharge of that debt. Another claim of which the creditor may contest discharge is one which is not a support claim resulting from divorce. Under Chapter 7, a creditor may contest discharge of a particular debt by filing the claim within 60 days of the first meeting of the creditors. During the resulting hearing, the creditor must prove that the debt fits in one of the categories of non-dischargeable debt. Failure to do so will result in discharge of the debt, meaning at most the creditor will only be able to recover the “ten cents on the dollar” of the ensuing pro rata distribution.

If you have creditor’s threatening you, and want to know your rights, or if you need an experienced bankruptcy attorney to protect your rights as a creditor, give the Dothan legal team at Parkman White, LLP a call at 334-792-1900 or email us today. We can assist you with your creditor rights issues, and we offer a free in-office consultation.