What rights do creditors have anyways?
There are two primary types of creditors that become involved in bankruptcy. First there is a secured creditor that has the ability to place a lien on property owned by the debtor in order to secure repayment of the loan. On the other hand, there are creditors with unsecured loans, which do not have the ability to place liens on any property of the debtor.
Upon filing of the bankruptcy with the court, the creditors to whom the debtor owes money will be notified. In a Chapter 7 Bankruptcy, the common form of debt is consumer debt, and thus it mostly falls under the category of unsecured debt. The goal for the debtor in a Chapter 7 is to liquidate and discharge as much of the debt as possible in order to obtain the FRESH START they need. In order to discharge debt the debt must be dischargeable under the statutes provided in the Bankruptcy Code.
There may be a debt that the debtor is claiming as dischargeable, while the creditor is claiming that it is non-dischargeable. The creditor has the right to try to exempt this debt from the list of dischargeable debt so that the court doesn't grant the discharge. The creditor would have to file what is known as a non-dischargeability complaint with the court. A debtor should really only be concerned with a creditor opposing to the discharge of a debt if, for example it's non-dischargeable. Just a few examples are:
- Alimony payments
- Child support payments
- Debt was obtained through fraud by debtor, etc.
These can be discussed in your FREE CONSULTATION.
The creditor has the right to object to a discharge in a debtor's Chapter 7 Bankruptcy. The Bankruptcy Court will evaluate several factors when determining whether to grant or deny the discharge. An objection to a discharge may be sustained if the debtor: made materially false statements in their petition; fraudulently transferred, concealed, or destroyed property of the bankruptcy estate; failed to produce satisfactory financial records; debtor failed to prove loss of assets; or acted in any other way detailed as improper for a debtor under the Bankruptcy Code.
The creditor may also seek relief from the Automatic Stay provided to debtor's under a Chapter 7 Bankruptcy. The Automatic Stay, is exactly as it is named and automatically stops all collection actions against the debtor. This automatic stay can freeze foreclosure actions, vehicle repossessions and more. It is a great protection provided for a debtor in need of help. Yet, if there is already an action pending against the debtor, or the foreclosure was about to occur the creditor seeking such action may ask for relief from the automatic stay protection. The creditor may be claiming that the debtor is acting in bad faith when petitioning for bankruptcy, especially Chapter 7 which may liquidate all of the debt.