Putting the Law to Work for You
For Businesses – Litigation
Protection of Rights and Claims in Bankruptcy Proceedings
When it comes to debt collection, it may seem like the odds fall in the favor of the creditor, since the creditor is the entity which is entitled to receive payment in the creditor-debtor relationship. However, while creditors do have certain legal rights when it comes to collecting outstanding debts, there are some situations in which debt collection can become a challenge. For example, imagine this scenario: a customer or client has a long past due account receivable. As a creditor, you believe you can count on ultimately recouping the funds you are entitled to. But then, you receive a notice that the customer or client has filed for bankruptcy. The protections of bankruptcy are good news for a debtor — but bad news for the creditor who is on the other end of the relationship.
Missing out on overdue payments can cause long-lasting, significant damages to any company. If you are a creditor who has been financially hurt by losses sustained through a debtor-creditor relationship, you may be entitled to restitution. At Maselli Warren, our attorneys are committed to aggressively upholding the financial rights of creditors. We have over 25 years of experience in the protection of rights and claims in bankruptcy proceedings, so contact us today.
Bankruptcy, Creditors, and the Automatic Stay
When an individual files for bankruptcy, they automatically come under the protection of the automatic stay, hence the name. Behind the shield of the automatic stay, debtors are given various rights and privileges. For example, service shut-offs are postponed, and the proceedings toward a foreclosure or eviction are temporarily halted in their tracks. Where creditors are concerned, the automatic stay has a particularly problematic aspect: it bars creditors from continuing to make contact with the debtors who owe them payments.
The United States Bankruptcy Code
On top of the automatic stay, bankruptcies present additional pitfalls to creditors. After a bankruptcy has been filed, your business may be sued by a bankruptcy trustee in a lawsuit claiming that a payment your company already received has to be returned back to the trustee. In bankruptcy, these lawsuits are referred to as preferential transfers. The good news for creditors is that federal bankruptcy laws provide a number of defenses to trustee claims; and at the very least, preferential transfer claims can often be negotiated to mitigate creditor losses.
The United States Bankruptcy Code is best known for affording rights and protections to debtors. However, the Code was not created exclusively to give relief to debtors, and the laws provided therein are also meant to protect creditors and their rights. This applies whether a debt owed is secured by a lien or collateral (such as a mortgage debt), or is simply unsecured and past due (such as a utility bill).