You may be surprised to learn that many creditors have limited rights when it comes to collecting on a debt. Secure debts, like car loans and mortgages, can be seized and liquidated; however, unsecured debts, like credit cards and medical debts, do not have repossession rights. This means that their collection efforts are greatly challenged, especially if the debtor files for bankruptcy.
Bubble Of Protection
When you file for bankruptcy in Dallas, an automatic stay order is issued. This order halts all debt collection efforts. For creditors, this is not good news. The automatic stay order requires creditors to cease collection activity and wait on the action of the court. This isn’t to say that creditors won’t get paid; rather they must now follow the debt resolution plan outlined by the court.
In a Chapter 7 case, creditors may be given the right to seize non-essential assets in exchange for satisfying the debt; or they may be required to eliminate the debt with no payment. In a Chapter 13 case, creditors will be required to adhere to the debtor’s plan; a plan that outlines how payments will be made over the course of three to five years. In either case, creditors may not collect on the debt in any form other than that approved by the court.
Creditors are often held at a standstill during the bankruptcy process, but they do get some lead way in the 341 Meeting of Creditors. This meeting his held prior to the court’s decision about how the case will be managed and allows all creditors the right to attend. During this meeting, creditors can make their claim on debt payments and present their case for why their account should be priority in the case. However, there is no guarantee that the court will heed the request of creditors made in the Meeting of Creditors; rather it is a platform to allow creditors a chance to voice their position.