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You’re a Small Business Owner, and You Just Became a Creditor in a Bankruptcy…Now What?
You’re a Small Business Owner, and You Just Became a Creditor in a Bankruptcy…Now What?
04/14/2015 | by: Danielle | Category: Dulaney Legal Blog, Uncategorized

 

Hire an Attorney

Almost every small business owner has at one time or another opened their mail only to discover that their business is listed as a creditor in a bankruptcy.  The inevitable questions becomes, what now?

When you find yourself listed as a creditor in a bankruptcy, the first thing you should do is hire an attorney to represent you. If the debtor owes you money, you may be entitled to all or a portion of those funds.

What Your Attorney Will Do For You

Many bankruptcy attorneys will charge creditors small or nominal fees depending on the services required. In return, the attorney will be able to look at the chapter, assets, and plan (if applicable) to determine your likelihood of being able to recoup any or all of your funds. An attorney specializing in bankruptcy will be able to assist you with filling out a proof of claim form (a form evidencing the debt owed), attaching the correct supporting documentation, and making sure that it is timely filed with the court.

Additionally, if you are owed payment on a secured debt (items such as houses, cars, boats, etc.) and the debtor is in default your attorney will be able to file the appropriate motions with the court to attempt to get the house, car, etc. back. Your attorney will also be able to advise you as to the appropriate means of collection on that debt.

 

Why It is Important to Hire an Attorney

The Bankruptcy Code is Federal Law. As such, the consequences and penalties for violating it can be extreme. When a debtor files for bankruptcy an automatic stay goes into effect. You can think of this as a protective shield coming down around the debtor. Once notice goes out to the debtor’s creditors that a bankruptcy has been filed, that shield is supposed to stop all collection efforts except those taken through legally prescribed means. Violating collection laws once the debtor is in bankruptcy can translate into YOU owing the debtor thousands of dollars.

Similarly, in general when you file a document in a bankruptcy case it becomes publicly accessible. Filing sensitive information of the debtor’s with the court can result in you owing the debtor thousands of dollars. It is important to consult with an attorney who will be able to determine which information needs to be filed with the court and which information should be redacted.

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