If you are a creditor or lender, either secured or unsecured, affiliated
or private, you have probably aware of the risks of pursuing a debt from
a consumer. In the event that you inadvertently step over the line, even
for a second and in the most minimal of ways, consumers are highly encouraged
to throw a lawsuit at you for collections violations. Losing such a case
would not only stop you from collecting on their loan but could also wind
up with you paying
So what can you do if one of your consumer clients files for
bankruptcy? Are you out of luck? Or are there steps you can take and rights you can
fight to uphold as a creditor without getting into legal trouble?
What You Can Do As a Creditor During Client Bankruptcy
Debt discharge denial: When someone goes into bankruptcy, the primary goal will be for them to
discharge as much debt as they possibly can, including the money that
they owe you for your loan. You will have a brief window of opportunity
– usually around 60 days – after the bankruptcy is declared
to file a petition to block your debt’s discharge. For the court
to consider your petition as valid, you will usually need to prove that
some unlawful or negligent actions on behalf of your client caused them
to fail in their payments.
Non-automatic stay: A consumer filing for bankruptcy will create an automatic stay on their
accounts, or an injunction that prevents creditors from collecting on
debts or attempting to do so. This is done without any legal action, thus
the term automatic. Depending on when the bankruptcy filing occurred and
what else was going on, such as a foreclosure or trial, you can ask the
bankruptcy court to remove the automatic stay, at least for your own collection purposes.
Chapter 13 dividends: If your client is filing for
Chapter 13 and proposing a repayment plan for their debts, you have a right to review
it. Depending on what you find in their repayment plan, you may be able
to challenge it by proving that it is either entirely unrealistic for
you to expect that you will eventually be repaid by the individual or
drafted in bad faith, or with the intent for it to fail.
You can, of course, also team up with a trusted Fort Worth consumer collections
attorney from The Pritchard Law Firm. With our 45+ years of combined experience,
we can discuss your case in a
free consultation to determine if you should file a lawsuit in defense of your interests. Call
(817) 727-4001 for more information.