What you should know if a debtor files for bankruptcy

On behalf of admin

Collecting money from debtors is rarely a business owner’s favorite part of the job, but it is necessary. You business, your employees and your financial well-being depends on people repaying loans you have given out. 

This is why it can be so frustrating when a debtor files for bankruptcy. This decision could mean that the courts discharge the debt owed to you, and that money is simply gone. In order to avoid this, you may want to consider objecting to the discharge of your debt. Understand, though, that you must follow strict rules when it comes to objecting to a debtor’s discharge.

  1. You must file your objection within a specific amount of time. This time limit should appear on the notice to creditors that you would receive regarding a debtor’s filing for bankruptcy. Before that deadline, you must file a complaint with the courts.
  2. Certain elements must be in place for an objection to be successful. Generally speaking, a court may deny discharge of debt if there is evidence of fraud, perjury, non-disclosure of financial information or a failure on the debtor’s part to comply with bankruptcy filing procedures.
  3. The rules vary based on the type of bankruptcy a person is filing. In accordance with federal bankruptcy laws, your options as a creditor are more limited if a party is filing for Chapter 12 or 13 bankruptcy versus Chapter 7 bankruptcy, for example.

These are the broad strokes of what is involved in the process of objecting to the elimination of debt in bankruptcy. There are numerous requirements, specifications and exceptions that are not discussed in the context of this post.

Should you have specific questions or concerns about how to protect your rights to repayment, then it could be in your best interests to consult an attorney experienced in enforcing creditors’ rights. With legal support and advice, you can make informed decisions that are in the best interests of your business and financial bottom line.