What Rights Do Creditors Have in Your Bankruptcy?
Like most legal proceedings, you can view a bankruptcy as an adversarial process where two sides have opposite goals and vie against each other. In bankruptcy, creditors have the goal of receiving as much debt payment as possible, and debtors hope to discharge as much debt as possible.
While most bankruptcies remain administrative in nature, lawsuits can arise within the bankruptcy, which are appropriately named adversarial proceedings.
Your protections and the flip side—the creditor’s rights
Bankruptcies offer you protections as the debtor. For one, the automatic stay stops creditors’ actions such as foreclosure, repossession, and debt collection calls or letters. However, some creditors have the right to file motions for relief from stay. If the court approves their motions, creditors can move ahead with foreclosure, car repossession, or whatever the approved objective was in their motion for relief from stay.
While the automatic stay typically stops creditor actions against you, the court also may require that you continue making current payments to the creditor and work out a payment plan for overdue payments. Secured creditors generally have this right in a Chapter 13 bankruptcy where, for example, debtors continue making house payments and their repayment plan incorporates gradually bringing all house payment debts current.
A creditor can file a proof of claim, which basically states the creditor’s claim to a debt. Creditors can object to your Chapter 13 repayment plan or to your right to file a Chapter 7, which pays creditors through liquidation of assets. They can also object to the bankruptcy court’s discharge of a debt or request denial of entire discharge, which means the bankruptcy court would deny the discharge of all your debts.
Under certain circumstances, a creditor may be able to obtain court approval to conduct a deposition and interview you in greater detail about your assets and debts.
Having a skilled bankruptcy lawyer at your side to advocate your rights can help you fend off creditors and obtain the benefits that bankruptcy provides you.