remedies rights creditor rights
What rights and remedies does a creditor have in the bankruptcy case?
A creditor has the basic right to receive a fair share of your non-exempt assets in a Chapter 7 case and to be treated fairly in a Chapter 11, 12, or 13 case. A secured creditor (i.e., one who has a lien on your property to secure the debt you owe) has a lien on the property that secures the debt.
Certain debts are not discharged in bankruptcy. A creditor holding such a debt may (and sometimes must) commence an “adversary proceeding” before a court-established deadline (usually about 60 days after the 341 meeting or first meeting of the creditors) to obtain a ruling that the debt will not be discharged.
In a “no-asset” Chapter 7 case, there are no non-exempt assets. Most unsecured debts will be discharged. Therefore, the only creditors who will actually participate in the case are the ones who hold security. They may file motions for relief from the automatic stay in order to foreclose on their loans or repossess the property securing the loans. The court generally holds a hearing on such a motion at which the debtor can contest the proposed action.
In an “asset” Chapter 7 case, there are non-exempt assets that the trustee will sell. The trustee will deduct a fee for his services and distribute the remainder among your unsecured creditors based on a priority scheme contained in the Bankruptcy Code. Creditors will be told to file proofs of claim with the court in order to participate in this eventual distribution. Properly filed claims are presumed to be accurate, which means that the creditor need not actually prove you owe a debt unless someone objects.
In cases under other chapters of the Bankruptcy Code, the debtor must look out for his/her own interests when it comes to claims by creditors. Creditors may file claims, and it will be up to the debtor to object if the claims are not accurate.
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usually happens creditor rights
What actions must a creditor take in a bankruptcy case?
The most common participation by a creditor in a consumer bankruptcy case is to file a proof of claim and share in the liquidation of the bankruptcy estate or under a proposed plan. The bankruptcy estate is overseen by the trustee who distributes the bankruptcy estate to the creditors after deducting trustee expenses, administrative costs, and paying priority claims, such as those made by the government. In most Chapter 7 bankruptcies there are few or no assets in the bankruptcy estate.
A proof of claim that is properly filed in accordance with the rules governing bankruptcy cases is evidence of the claim’s validity and amount and is deemed allowed unless the debtor or an interested third party objects. Unsecured creditors will not receive a distribution from the bankruptcy estate unless a proper proof of claim has been filed. The proof of claim must be filed within 90 days of the date when the meeting of creditors was first set (not including any continuances).
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owe-money-to-bankrupt-company credit problems
I owe money to a company that filed for bankruptcy. Do I have to pay?
Yes. If you do not, you may be contacted by the Trustee, the debtor company, a third-party who has purchased your debt, or a debt collector hired by any one of the above. When a company files for bankruptcy, the filing does not eliminate your obligation to the company. It’s part of the company’s assets and will be distributed to the creditors if the company is liquidated. Do not assume you can ignore the debt.
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companies credit credit problems
My credit report is really messed up right now. I’ve heard about companies that can help me to fix it quickly. Does this really work?
There are indeed legitimate businesses out there that can help you clean up your credit record. Some will contact your creditors, try to consolidate your debts, and put together a repayment plan. They may be able to advise you on bankruptcy and whether your should consider it. Many are non-profit agencies who charge small or even no fees to provide credit counseling. You can locate agencies in your area under Credit & Debt Counseling Services in your yellow page directory. For more information on legitimate credit counselors go to National Foundation of Credit Counseling website.
None of these efforts will instantly repair bad credit. Only the passage of time and care on your part can repair past damage. Credit errors will be erased from your record in 7 years and bankruptcies in 10 years. A good track record in resolving problems and paying on time can improve your credit even more quickly than that.
Unfortunately, there are companies claiming instant cures that are actually scams. The signs of scam include:
Asking you to pay for credit repair services before you’ve received any services from them;
Not telling you what your legal rights are or what you can do for yourself without paying any fees;
Advising you not to contact a credit reporting bureau directly;
Advising you to create a new credit persona by using a new Employer Identification number instead of your Social Security number.
There are firms currently operating on the Internet that are selling “credit repair kits” for $20-130. The actions recommended in some of these materials are illegal (such as concealing your identity) and will only get you into more legal trouble and make your situation worse. Be careful and check out companies you work with thoroughly.
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secure credit credit problems
What is a secured credit card?
Some people have a poor credit record because they have not paid outstanding debts in the past or because they have recently filed for bankruptcy. People with poor credit records are generally unable to get any credit at all, or if credit is extended, the finance charge is the high and comes with an “application fee” to obtain the credit.
Some lenders have begun to offer secured credit cards to those who have bad marks on their credit record. Under a secured credit arrangement, the debtor places funds on deposit with the bank or other financial institution. The lender then allows the debtor to make credit card purchases from 90% to 150% of the amount placed on deposit – depending upon the individual circumstances. This arrangement enables people with poor credit records to have the convenience of having a credit card, while assuring the lender that there is a source of money from which the obligation will be paid.
Unfortunately, some of the secured credit card offers are scams. Visit the Federal Trade Commission’s website for more information. If you are using a secured credit card in order to create a good credit history, you need to make sure that credit card company reports to a credit reporting bureau. Not all of them do, and if yours does not, you will waste your effort.
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uniform transfer to minors consumer bankruptcy
Will the Uniform Transfers to Minors Act help me provide for my children?
Money held in trust for someone else is not property of the estate. Let’s say you setup a Uniform Transfers to Minors Act (UTMA) “custodianship” in the form a bank account. Because you cannot revoke the custodianship, any money you deposit to the UTMA account is not your property. Your payments might nonetheless be found to be fraudulent transfers if they were made with an intention to hinder, delay or defraud your creditors or at a time when you were insolvent.
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family gifts bankruptcy consumer bankruptcy
What about family gifts?
Small customary gifts to family members are not voidable preferences. “Small” means less than $200 in aggregate during the past year.
Example: you give your daughter an Aston Martin for her birthday. If it’s a real one worth $250,000, it’s avoidable as a fraudulent transfer. If it’s a Corgi toy costing $25, it’s not.
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divorce-and-bankruptcy consumer bankruptcy
My ex-spouse was ordered to pay some debts in our divorce. Can he avoid paying by declaring bankruptcy?
In some cases he can. It depends on whether the payment of the debt is characterized as support. Many divorce decrees specifically include payments of marital debts as support obligations to make it easier for the receiving spouse to prevent the paying spouse from discharging the debt. Even if yours does not, the bankruptcy judge can review the judgment to determine whether that is what was intended.
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pay-debt-outside-bankruptcy consumer bankruptcy
Can I pay some debts outside of bankruptcy?
This is a tricky question. First, some payments that you make before you file might backfire. The trustee is permitted to set aside certain prepetition payments as preferences. When this happens the trustee often sends a letter to the creditor and asks for the money. If the creditor refuses to hand it over, the trustee can sue the creditor to recover it. This money becomes part of the bankruptcy estate and can be distributed to other creditors unless you have an exemption to cover it. Second, after you file your petition, you can pay whomever you like, but it seldom makes sense unless there is a bankruptcy reason to do so. In a Chapter 13 bankruptcy, your plan may include some payments that are “outside” of the plan. This doesn’t technically mean that the payments are outside of the bankruptcy. What it means is that you will make the payments directly to the creditor instead of paying the money through the trustee. This arrangement makes sense, for example, in situations where the trustee is not timely in paying your mortgage and you want to pay it directly to the mortgage company to make sure you do not end up with late payment marks on your credit report. Another reason to pay a debt “outside” of the bankruptcy is that the debt arose after you filed. Chapter 13 bankruptcy imposes strict limits on new credit, but some debts, like medical bills, are unavoidable. These debts survive bankruptcy and you should pay them.
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bankruptcy move consumer bankruptcy
I moved recently. How might that affect a bankruptcy case?
There are two ways in which moving to a new home might affect a bankruptcy case, and they both relate to the exemptions that are available in Chapter 7 and that govern the liquidation analysis that a Chapter 13 plan must satisfy.
Unlike prior law, BAPCPA allows a debtor to use the bankruptcy exemption scheme of the state where the debtor has been domiciled for the 730 days (roughly 2 years) immediately preceding the petition date. Someone who moved from another state within the preceding 730 days must use the exemptions provided by the state in which the debtor was domiciled for a greater part of the 180 days preceding the 730 days than in any other state. Some states allow a bankruptcy debtor to elect the state’s own exemption scheme or a uniform scheme provided in the Bankruptcy Code itself, but many states do not. To further complicate matters, some state exemption schemes do not apply to non-residents. If the result of looking back 730 days and the greater part of the 180 days preceding the 730 days is that a debtor would be entitled to no exemptions, BAPCPA allows the debtor to use the Bankruptcy Code exemptions.
BAPCPA does not spell out what happens when some of the relevant state’s exemptions (such as those for personal property) apply but others (such as a homestead exemption) do not. Only judicial decisions or legislative amendments can clarify this matter.
The second way in which moving affects a bankruptcy case relates to homestead exemptions. Some states have homestead exemptions that exceed $125,000. BAPCPA eliminates the excess over $125,000 for any interest acquired within the 1215 days (roughly 40 months) preceding the petition date. There is an exception when the debtor owned a home in the same state longer ago than 1215 days and rolled the proceeds of selling that home over into a new home within the 1215 days. According to the plain meaning of BAPCPA, someone who moves more than once within the same state would have their homestead limited to $125,000. At least one bankruptcy judge has rejected this argument; in that judge’s view, a debtor is allowed to rollover the proceeds of more than one sale without losing the benefit of the state’s homestead exemption.
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