When a debtor files for bankruptcy, the bankruptcy clerk’s office automatically sends the Notice of Chapter 7, 11, 12 or 13 Bankruptcy Case, depending on what chapter of bankruptcy the debtor filed, to all creditors listed by the debtor. You received this notice because either the debtor owes you money or you have a claim or potential claim against the debtor. It contains important information regarding the 341 meeting of creditors and deadlines that are critical to the case.

It depends.

Debtor filed Chapter 7 bankruptcy

In Chapter 7 bankruptcy, there is either an “asset” case or a “no asset” case. When a debtor files for bankruptcy, she is entitled to keep a certain amount of assets, known as exemptions. If debtor has assets beyond the exemption limit, the trustee will liquidate the assets and distribute it to the creditors. Such case would be considered an asset case. If there is no assets beyond the exemption limit, the creditors will not receive any money.

In an asset case, you will receive a Notice of Possible Dividend. This is the trustee’s way of informing the creditors that there may be money available to pay the creditors. It’s important that you complete the Proof of Claim. The Proof of Claim is like a reimbursement request. If you do not complete it, you will not be paid.

When completing the Proof of Claim, you must attach documents to support your claim. There is very specific rules about information you must include and information and that you must redact.

Debtor filed Chapter 13 bankruptcy

In Chapter 13 bankruptcy, debtors are required to make payments for typically 3 or 5 years. The amount of her payment depends on several factors including her disposable income (amount left over after necessary expenses), liquidation analysis of debtor’s assets and types of debts, such as priority claims, arrearages, and secured claims.

Similar to an asset Chapter 7, you must complete the Proof of Claim in order to get paid. Unlike a Chapter 7, in Chapter 13 the debtor prepares a plan that explains how much will be paid to each type of creditor.

It depends. In an asset Chapter 7, the trustee deducts her commission and any professional fees (such as her attorney fees, accountant fees and others) before distributing any money to the creditors. Whatever mount leftover will be distributed pro rata. Meaning, if your claim makes-up 10% of the total claim, you will receive 10% of the net amount.

In a Chapter 13, the debtor proposes to pay certain amount each month, and must explain how much is being paid to each type of creditor. How much you are paid is a product of the debtor’s income, expenses, assets, other debts and other factors.

It depends. If you have a judgement, the underlying debt may be discharged so your judgement can be meaningless. However, if there is an asset Chapter 7 or debtor files a Chapter 13, your lien entitles you to priority over certain types of creditors. Moreover, if you have a special kind of debt that is not dischargeable, plus a lien, you are placed in a stronger position to collect in the future.

If you have a valid purchase money security - for example, you sell your business to a buyer and have a lien against the business, you are secured creditor. Your lien against the business still remains intact through bankruptcy. The debtor will have to decide whether she’s going to retain (and pay on the lien) or surrender.

The 341 hearing, also known as Meeting of Creditors is where the debtor meets with the trustee and any questions the trustee has. Creditors also have the right to attend the meeting and ask questions. If you do attend the hearing, you will be given a few minutes to question the debtor. Typically, these hearings are very brief (lasting less than 15 minutes).

There are other methods for questioning the debtor in more depth if needed.

When a bankruptcy is filed, there is an Automatic Stay that goes into effect. Think of the Automatic Stay as a protective bubble for the debtor. While the Automatic Stay is in effect, most creditors are prohibited from any collection efforts. This includes calling the debtor, writing the debtor, showing up at his house, going to recover your property, etc. There are some exceptions to the stay, including domestic support obligations (DSO) such as child support.

Violating the Automatic Stay is a big no-no. You may find yourself faced with a proceeding where the debtor seeks to recover damages against you for violating the Automatic Stay.

In certain instances, you may be able to ask the court for Relief from the Automatic Stay which will allow you to recover the secured property (for example, in case of a car) or proceed with certain proceedings such as a foreclosure or lawsuit.

Typically not. The lawsuit is likely stayed by the Automatic Stay. However, some proceedings such as criminal prosecutions are not stayed. If the debtor is represented by insurance, you may be able to proceed against that as well.

Yes. The trustee has many powers under the Bankruptcy Code, particularly Chapter 7 trustees. Money paid to you in the 90 days before debtor filed is potentially a preference. If you are a family member or business associate, this deadline extends for one year. In cases of fraud, the ability of the trustee to recover such transfers of money or property can extend for years.

Yes. If you recovered funds from the debtor within 90 days of filing the case, the debtor can bring an action against you to recover these funds in certain circumstances.

Under limited circumstances, you may be able to bring an Adversary Proceeding against the debtor and ask the court to deny the debtor’s dischargeability of particular debts.. An Adversary Proceeding is a lawsuit within bankruptcy. 11 USC § 523 of the bankruptcy code lists exceptions to discharge. Debts that cannot be discharged include debts from fraud, domestic support obligations, willful and malicious injury among others. A total denial of the discharge of all debts can be found under 11 USC § 727. Reasons under 727 includes debtor knowingly and fraudulently making a false oath and abusing the bankruptcy process.