Many businesses must collect on unpaid balances owed by individual consumers. Attempting to do so can be a frustrating process, especially when debtors make concerted efforts to avoid their financial obligations.
Some people go so far as to file for personal bankruptcy as a means of avoiding responsibility for their debts. Many creditors immediately assume that they are out of options once a debtor files for bankruptcy.
However, creditors have rights during the bankruptcy process.
The courts can hear from concerned creditors
Typically, when individuals file for bankruptcy, the courts provide them with an automatic stay. All collection activity halts temporarily. Creditors cannot call debtors, send them letters or move forward with debt collection lawsuits.
However, creditors do not need to accept abuses of the bankruptcy process. Especially in cases where the bankruptcy filing appears potentially fraudulent, creditors may have legal rights. An attorney can file paperwork requesting adversary proceedings related to a pending bankruptcy case.
Adversary proceedings are secondary lawsuits related to a bankruptcy case. Creditors can ask the courts to lift the automatic stay so that they can continue their collection efforts.
They can also sometimes convince the courts to exclude their debts from the discharge granted at the end of the bankruptcy process, which allows them to resume collection efforts after the bankruptcy. Both of those solutions can be valuable for creditors concerned about the financial setback of a debtor discharging the entirety of what they owe.
Reviewing the debt and the conduct of the debtor can help determine whether adversary proceedings might be a beneficial move given their circumstances. Working with an attorney who understands creditor rights during consumer bankruptcy cases can help frustrated creditors hold people accountable, possibly even after they file for bankruptcy.