The Bankruptcy Law Firm, PC in Los Angeles
Creditor's Frequently Asked Questions About Bankruptcy:
Creditors’ Frequently Asked Questions include:
Question: I just received a notice in the mail, from a U.S. Bankruptcy Court, saying that a person, or a corporation, or a LLC, has filed bankruptcy, and that I am a creditor in that bankruptcy case. What do I do now to try to get paid the money I am owed by the person, corporation or LLC that has filed bankruptcy?
Answer: Immediately, a creditor needs to hire a competent bankruptcy attorney to advise you on your rights, as a creditor in bankruptcy, and then hire the bankruptcy attorney to take action timely, to try to protect your rights, and get you paid as much of what you are owed as bankruptcy law allows you to be paid, through the bankruptcy case.
Question: Are there deadlines for how fast creditors must do things, in bankruptcy case?
Answer: Yes, there are many deadlines (aka “bar dates”) for creditors to do things in a bankruptcy case, some quite short. Deadlines that creditors must comply with include deadlines for the creditor filing non-dischargeability or denial of discharge adversary proceedings against the debtor, deadlines for filing a proof of claim, deadlines for objecting to debtor’s proposed Chapter 13 or Chapter 11 plan, etc. If a creditor misses a deadline, a creditor usually will lose rights, including if the creditor misses the deadline for filing a Proof of Claim, despite the creditor having received a notice from the Bankruptcy Court that the debtor has filed bankruptcy, the creditor will usually lose the right to be paid anything in the bankruptcy case. If a creditor fails to timely object to the debtor’s proposed plan, the plan will often be confirmed, and then the plan will bind the creditor to the terms of the plan, even if the plan is unfair, and even if the creditor could have prevented the proposed plan from being confirmed (approved by the Court) if the creditor had timely filed an Objection to the debtor’s proposed plan. Creditors usually need to hire a competent bankruptcy attorney to prepare, file, and argue in the Bankruptcy Court, a creditor’s Objections to the debtor’s proposed plan.
Question: The person who has filed bankruptcy owes the creditor a debt that arises from the debtor having defrauded the creditor, or having embezzled from the creditor, or having breached a fiduciary duty owed to the creditor, or having committed a wilful and malicious act against the creditor. What can the creditor do, to try to stop the bankruptcy debtor from having that debt discharged in the debtor’s bankruptcy case?
Answer: The creditor must timely file an adversary proceeding for nondischargeability of the debt in question, in the debtor’s bankruptcy case, within 60 days after the date first set for the debtor’s “341a” meeting (meeting of creditors) in the bankruptcy case. A nondischargeability adversary proceeding, to try to keep a debt from being discharged, in the debtor’s bankruptcy case, because the debt arose from the debtor committing fraud, embezzlement, breach of fiduciary duty, or from debtor committing a wilful and malicious act against the creditor, is brought pursuant to 11 USC 523(a)(2), (4) or (6). “Click” on the adversary proceeding “button” on the list in the left hand side of the front page of this website, to read more about adversary proceedings, which are lawsuits filed in bankruptcy cases. Unless a creditor has legal training, the creditor will need to immediately hire a competent bankruptcy attorney, to prepare, timely file and litigate a nondischargeability adversary proceeding, with the creditor as plaintiff, against the debtor, in the debtor’s bankruptcy case, or the debt will be discharged, if the debtor receives a discharge in the debtor’s bankruptcy case.
Question: The person who has filed bankruptcy has lied or concealed, in that debtor’s bankruptcy schedules, filed in the debtor’s bankruptcy case, by not revealing (or by understating the value of) real property, stock the debtor owns, value of a business that the debtor owns, value of lawsuits or claims that the debtor has against other persons, vehicles, bank accounts, boats, planes, artwork, antiques, or lies about or conceals anything else of value that the debtor owns. How does a creditor try to stop a bankruptcy debtor who has lied and concealed, from receiving a discharge, in the debtor’s bankruptcy case?
Answer: The creditor needs to timely file a denial of discharge (11 USC 727) adversary proceeding against the bankruptcy debtor, in the debtor’s bankruptcy case. The deadline for filing a denial of discharge adversary proceeding, in the debtor’s bankruptcy case, is 60 days after the date first set for the debtor’ “341a” meeting (meeting of creditors). Immediately upon receiving notice that the debtor has filed bankruptcy, and has lied about or concealed assets, in the debtor’s bankruptcy schedules, the creditor needs to hire a competent bankruptcy attorney to prepare, timely file, and litigate a denial of discharge (11 USC 727) adversary proceeding against the bankruptcy debtor, to try to stop the bankruptcy debtor from receiving a discharge, in the debtor’s bankruptcy case.
Question: What is a “Proof of Claim” and how do I file one in Bankruptcy Court, in the bankruptcy case of a person, corporation or LLC which has filed bankruptcy?
Answer: A Proof of Claim is the form that a creditor must timely file, under penalty of perjury, in the bankruptcy case to tell the Bankruptcy Court how much money the bankruptcy debtor owes the creditor, for what, and whether the creditor’s claim is secured, priority unsecured, or general unsecured. Creditors can file simple Proofs of Claim without hiring a bankruptcy lawyer to prepare the Proof of Claim for the creditor, but for complicated proofs of claim, or for large dollar amount proofs of claim, it is wiser for the creditor to hire a competent bankruptcy attorney to prepare the Proof of Claim, have the creditor review and sign the proof of claim, do a Declaration of the creditor to sign, to give information about the claim, and to attach and authenticate relevant documents (contracts, judgments, Notes secured by deeds of trust, etc., to prove the Proof of Claim. Debtors, trustees and even other creditors can file Objections to Proofs of Claim, and the best chance a creditor has, for the creditor’s proof of claim to win, against such objections, is where the creditor’s proof of claim is properly prepared, has a detailed declaration, and attaches and authenticates all relevant documents.
Question: The bankruptcy debtor has filed a proposed Chapter 13 or Chapter 11 plan, and that plan is NOT fair to me, the creditor. What should I, as a creditor, do?
Answer: Where a proposed Chapter 13 or Chapter 11 plan does NOT provide to pay the creditor the amount that bankruptcy law requires the creditor to be paid, the creditor needs to timely OBJECT to the plan, to try to stop the plan from being confirmed (aka approved) by the Bankruptcy Judge. Unless a creditor has legal training, a creditor usually needs to IMMEDIATELY hire a competent bankruptcy attorney to prepare, timely file in the bankruptcy case, and then argue to the Bankruptcy Judge, the creditor’s OBJECTION to the debtor’s plan being confirmed (aka approved) by the Bankruptcy Court. If no objection is timely filed, the creditor loses the right to object to the proposed plan, the proposed plan will likely be confirmed (aka approved) by the Bankruptcy Judge, if no one (Trustee, creditor, Office of U.S. Trustee) files a timely Objection to the plan. If the plan is confirmed (aka approved) by the Bankruptcy Judge, the creditor will be bound by the terms of the confirmed Plan, even if the confirmed plan is unfair to the creditor, and even if the creditor could have demanded, and gotten, better treatment (more payment) from the plan, if the creditor had filed a timely Objection to the proposed plan.
Question: I am a creditor owed a loan which the bankruptcy debtor has defaulted on paying me, and I have a recorded deed of trust giving me a lien on the debtor’s house or other real property, ie, my loan is secured by a lien on real property owned by the debtor. I want to hold a nonjudicial foreclosure sale of the debtor’s property, which my loan documents, and the recorded deed of trust I hold, allow me to do, outside of bankruptcy. But now that debtor has filed bankruptcy, what can I do to try to get paid the amount the debtor owes me, on the debtor’s defaulted loan?
Answer: Secured creditors may be able to bring, and get granted, a motion for relief from the bankruptcy automatic stay, to allow the creditor to proceed, as allowed by nonbankruptcy law, pursuant to the creditor’s loan documents (note and recorded deed of trust) to hold a nonjudicial foreclosure sale of debtor’s real property that the secured creditor has a lien on. Creditors beware: the bankruptcy automatic stay (11 USC 362(a)(1)-(8)) goes into effect the moment the debtor’s bankruptcy case is filed, and stays (aka stops) creditors from taking most actions creditors want to take to try to collect what the creditor is owed. Motion for relief from stay is one of the most common motions that creditors bring in debtor’s bankruptcy cases. Creditors should not attempt preparing and filing and arguing a motion for relief from stay, without an attorney, as this rarely succeeds. A creditor wishing to file a relief from stay motion needs to promptly hire a competent bankruptcy attorney to represent the creditor, to advise the creditor on the chances of winning relief from stay motion, if one is brought, and if the creditor wants to bring such a motion, to prepare/file/argue in Bankruptcy Court, that relief from stay motion, as counsel for the creditor.
Materials Prepared by:
Kathleen P. March, Esq.
The Bankruptcy Law Firm, PC
10524 W. Pico Blvd, Suite 212
Los Angeles, CA 90064
Phone: (310) 559-9224
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March IS A TRIPLE CERTIFIED BANKRUPTCY SPECIALIST ATTORNEY: In addition to being a former US Bankruptcy Judge, Attorney March is a triple certified bankruptcy specialist attorney. March is certified as a bankruptcy specialist attorney by the State Bar of California Board of Legal Specialization. In addition, March is certified by the American Board of Certification (nationwide certification) as both a consumer bankruptcy specialist attorney, and as a business bankruptcy specialist attorney. Very few attorneys are triple certified bankruptcy specialists. Many attorneys who claim to be “bankruptcy attorneys” are not certified by the California State Bar, or by the American Board of Certification, or by any specialist certifying agency at all.
The Bankruptcy Law Firm
10524 W. Pico Blvd.
Los Angeles, CA 90064
Phone: (310) 559-9224
Fax: (310) 559-9133
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