As a creditor, finding out that your debtor wants to file for bankruptcy in Florida can be discouraging. You may not know your rights as the creditor or even how best to navigate this process.
However, it’s crucial for you to know your options and how you can financially protect yourself:
What type of bankruptcy did they file?
The debtor may file for Chapter 7 or Chapter 13 bankruptcy. If it’s a Chapter 7 bankruptcy, they have decided to liquidate their assets to pay off their debts. As a creditor, you may be able to receive some payment for the debt owed to you. Still, the amount you receive will depend on various factors, such as the assets available for liquidation, the priority of your claim against other creditors, and the debt amount.
If they file for Chapter 13 bankruptcy, they are seeking protection from their creditors while they restructure their debts. Chapter 13 bankruptcy is also known as a reorganization bankruptcy, which allows individuals to repay some or all of their debts over a period of time.
You will receive the notice of the debtor’s bankruptcy filing, which includes the type of bankruptcy filed. Once the debtor files for bankruptcy, all collection efforts against them must stop right away. If you continue attempting to collect debts, it’s a significant violation of the automatic stay provisions of the bankruptcy code.
The first step you should take is to file a proof of claim with the bankruptcy court. This document details the amount owed to you and other relevant details about the debt. You need to file the proof of claim before the deadline set by the court to be considered for any payment.
Once you have filed your proof of claim, the bankruptcy trustee will review it and determine the validity of your claim. If your claim is approved, you may receive payment from the proceeds of the liquidated assets.
Navigating bankruptcy proceedings can be challenging, particularly if you aren’t familiar with the process. To protect your interests, you’ll want to consider having someone who can advocate on your behalf throughout the process.