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 San Jose Business & Commercial Law Blog

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Asserting Your Rights as a Creditor When a Debtor Files for Bankruptcy

Just as debtors have legal rights in the bankruptcy process, so do creditors. The specific rights depend on whether a given debt is secured or unsecured, and the priority of the debt relative to debts owed to other creditors. Working with an experienced creditors' rights bankruptcy attorney, you - the creditor - can ascertain your exact legal rights even as a debtor liquidates assets in Chapter 7 bankruptcy or a business reorganizes debt via Chapter 11 bankruptcy.

Efficiency Is Key in Matters of Debt Collection

As a creditor, you do not want to spend so much money in working to collect a debt as to negate the value of the debt. Thus, you need to identify your rights as a creditor as codified in the U.S. Bankruptcy Code to determine what debts and debtors are worth pursuing in the first place. After you have made the relevant identifications, efficient cost-effective debt collection is a must, ensuring that the collection process itself does not overly devalue the very debt that is tasked with collecting.

Ensuring that Your Rights Are Not Violated As a Debtor Goes Through Bankruptcy

When a debtor goes through the Chapter 7 bankruptcy, he or she is allowed to liquidate non-exempt property and thereby shed debt. In this process, disputes may arise between what property is exempt from liquidation and what property is not. Similarly, a debtor may attempt to convey property to a third party prior or during the bankruptcy process in order to spare it from liquidation. Of course, liquidation is what you - the creditor - are counting on in order to be repaid the debt you are owed. So, it is in your interest to ensure that all property that is not exempt from the bankruptcy process be duly identified, disallowed from unlawful conveyance, and liquidated as required. When issues arise and your legal rights are under threat, work with an experienced creditors' rights bankruptcy attorney.

Taking Action to Protect Your Rights as a Creditor

A San Jose bankruptcy attorney experienced in advocating for creditors' rights possesses an array of legal tools authorized by the U.S. Bankruptcy Code, including challenging an "automatic stay" granted to a debtor, filing actions to challenge the discharge of non-dischargeable debt, asserting your status as a priority creditor, filing suit against a debtor who has fraudulently conveyed an asset, and challenging a debtor's attempts to remove lien encumbrances from property during the bankruptcy process.

Source: https://www.usbankruptcycode.org/chapter-5-creditors-the-debtor-and-the-estate/

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