Guest Commentary By Camber Jones, Spencer Fane
The Coming Bankruptcy Wave: A Bankruptcy Overview for Creditors
Tis article provides creditors with a brief bankruptcy overview, including the most common types of bankruptcy cases, to enable them to more confidently participate in the bankruptcy process. Of course, bankruptcy is complex, and each case is uniquely nuanced. Creditors should contact a bankruptcy attorney for assistance in responding to specific bankruptcy filings.
Every bankruptcy case is initiated by filing a bankruptcy petition. A debtor who files under any chapter of the Bankruptcy Code is required to file certain statements and schedules outlining its financial condition, including secured and unsecured debts. Creditors should review a debtor’s petition, statements and schedules to gain insight into, among other things, the debtor’s intentions with regard to their debts and related collateral.
Te filing of a bankruptcy petition triggers an injunction called the “automatic stay,” which temporarily halts most collection actions against a debtor or a debtor’s property. It is imperative that creditors not violate the automatic stay. When a creditor receives notice of a bankruptcy filing, it should immediately cease all actions against the debtor, including wage garnishments, collections, foreclosures and repossessions.
7 case, a bankruptcy trustee gathers and sells a debtor’s nonexempt assets and distributes proceeds to creditors. Where there are no nonexempt assets available for sale, unsecured creditors do not receive distributions. Secured creditors generally retain their valid liens and the ability to enforce them aſter a bankruptcy case concludes.
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