If you are a creditor of an individual or business that has filed for bankruptcy:
1. Stop collection actions. Immediately cease any collection action, including telephone calls, billing or law suits that might be pending against the debtor.
2. File a claim with the court. The notice of the bankruptcy sent by the court clerk tells you where to file a “proof of claim” and the deadline for doing so. Act promptly since deadlines are strictly enforced in a bankruptcy case. Attach a copy of any contracts or judgment concerning a claim, or a summary of the claim, if the supporting documents are voluminous.
3. Consider whether your claim is dischargeable. Certain kinds of claims are non-dischargeable in an individual’s Chapter 7 bankruptcy case.
4. Determine whether your claim is secured by the debtor’s assets. Secured creditors have a lien giving them specific rights to the property that is the collateral for their claim. Most often, those rights are created by, and described in, a deed of trust on real property, a security agreement on personal property, or a judgment lien.
5. Share information with the trustee. If you suspect that the debtor’s schedules aren’t telling the whole story, that assets are concealed or have been transferred, contact the trustee and provide any documents or facts that might help the trustee recover money for the estate, or challenge the debtor’s right to a discharge. Creditor vigilance is the best deterrent to abuse of the bankruptcy system. Creditors are entitled to question the debtor under oath about assets, liabilities and financial history at the first meeting of creditors or by separately scheduled examinations under Rule 2004 of the Federal Rules of Bankruptcy Procedure.
6. Monitor the progress of the case. Some bankruptcies are dismissed for the debtor’s failure to comply with the requirements of the Bankruptcy Code. When that happens, creditors are free to pursue collection according to state law. Sometimes cases originally classified as “no asset” cases blossom into asset cases from which a dividend may be paid. Make sure the court has your current address until the case is closed so that you get notice if there will be a dividend.
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