What Debts Can Be Prevented From Being Discharged In A Chapter 7 Or Chapter 13 Bankruptcy Case? Could This Help Our Chances Of Recovering A Commercial Debt Owed To Us?
The bankruptcy code lists what can and cannot be discharged through bankruptcy. The bankruptcy judge will determine whether unsecured creditors are paid some or all of their claims. For most individuals who file Chapter 7 or Chapter 13 bankruptcy, we’re looking at a minimal or zero recovery. The exception to that is if our client moved quickly to obtain a judgment and record liens so that they become a secured rather than unsecured creditor. Corporations or LLCs that file bankruptcy don’t technically get a discharge like an individual does. In a Chapter 7 corporate bankruptcy, the assets of the company are liquidated and the assets are distributed pro rata to the creditors. The secured creditors receive priority over unsecured creditors.
If Our Business Was Not Listed As A Creditor In A Bankruptcy And We Didn’t Receive Notice, Do We Still Have A Chance To Recover From The Debtor?
Under bankruptcy law, a creditor’s debt is not discharged if the creditor did not receive notice of the bankruptcy. If the debtor did not schedule the creditor in their bankruptcy schedules, then the bankruptcy won’t impact the creditor. However, as a practical matter, a clerical error is usually to blame for the omission of a creditor. Under these circumstances, the debtor or their attorney will generally ask the bankruptcy court to reopen the case so that the creditor can be added to the bankruptcy schedules. Bankruptcy is usually a sign that a debtor doesn’t have a lot of assets that can be subject to levy (if a debtor has significant assets, then they probably wouldn’t be filing bankruptcy to begin with). Most of the time, bankruptcy is not a good thing for a client (i.e., creditor), and it highlights that we need to move quickly to increase the chances of recovery.
As A Creditor, Should We Attend The Debtor’s 341a Meeting Or Will Our Commercial Collections Attorney Do So On Our Behalf?
A creditor is not required to attend the meeting. There’s usually very limited questioning that’s allowed at these meetings, because the trustee will be handling many cases that day. If there is a need to appear at the meeting, then the creditor’s attorney should be able to do that on the creditor’s behalf. In most cases, we don’t appear because there are other methods we can use to obtain the information in a more complete manner. We can ask more questions through interrogatories or take a bankruptcy deposition, which would usually give us much more information than at a 341a meeting. 341a meetings are designed primarily for the bankruptcy trustee to ask the debtor questions and make sure it’s not a fraudulent bankruptcy.