Getting Paid From Someone Filing Bankruptcy
It can be difficult and stressful when someone who owes you money declares bankruptcy. However, you may still be able to recover part or all of the sum due to you. This article will walk you through the steps you may take to increase your chances of receiving payment if a debtor files bankruptcy.
Understanding Bankruptcy & How It Impacts Creditors
Bankruptcy is a legal process in which people or organizations can discharge or restructure their obligations. When a debtor files for bankruptcy, an automatic stay is issued, which prevents creditors from collecting debts. During this process, a bankruptcy court appoints a bankruptcy trustee to oversee the case and manage the debtor’s assets. Understanding the bankruptcy procedure, including the bankruptcy trustee’s role, might help you decide on the best course of action.
Types of Bankruptcy Filing
There are various sorts of bankruptcy filings, but the most prevalent ones affecting creditors include:
- Chapter 7 bankruptcy is liquidating a debtor’s assets to pay off creditors.
- Chapter 11 bankruptcy is a business reorganization that allows it to maintain operations while repaying debts.
- Chapter 13 bankruptcy is a debt payback strategy that allows individuals to pay creditors over time.
Knowing what sort of bankruptcy the debtor has filed will help you better assess your chances of recovering funds.
