When a person enters bankruptcy in Chicago, the law requires that their creditors be notified. If you’re a creditor and you’ve received a bankruptcy notice, there are certain steps you should take to recoup at least some of your losses. First, all collection actions (mailings, phone calls and legal actions) should be stopped, because debtors are entitled to an automatic stay once bankruptcy is filed. If you do not stop collection activities, you could lose your recovery. Otherwise, your chances depend on the priority of your claim, which is discussed below.
Determining Priority in a Bankruptcy Claim
During a bankruptcy, a debtor’s disposable assets are used to pay off as much debt as possible. Secured debt is easier to collect due to its higher priority, and the property used as collateral can be seized. If a debt is relatively small and unsecured, it is of lesser priority, and creditors won’t recover until higher-priority debts are paid.
The amount a creditor can expect to collect depends on the debt’s type, priority, number of creditors, and the size of a debtor’s assets. If a debt cannot be discharged, priority is not a factor; debts such as fines, civil damages, alimony and child support cannot be wiped out. A bankruptcy lawyer can tell you whether you have a chance of a monetary recovery.
Hiring a Bankruptcy Attorney
If you need to recover your losses from a debtor, it is a good idea to hire a bankruptcy attorney in Chicago. Your lawyer can tell you the status of a debt, and give you an idea of what you will recover. If your debt is low-priority and small in size, it probably is not worth filing a claim in bankruptcy court.
If your bankruptcy lawyer tells you that your debt is worth the pursuit, you should file a claim in your local court right away. The deadline to file a claim is typically very short, and in most places, it is strictly enforced. You should also consider attending a creditors’ meeting (sometimes called a 341 meeting). These meetings give creditors a chance to gather relevant information about a debtor.