Q: I’ve just received a bankruptcy notice from someone that owes me money. What should I do?
A: Take no further action to collect the debt. Look carefully at the bankruptcy notice itself. See who filed, when, in which bankruptcy court, and under what chapter of the bankruptcy law the person filed. Then see a bankruptcy lawyer for further advice.
Q: Does a bankruptcy filing mean I’ll never see my money?
A: Not necessarily. Although most bankruptcies result in no payments to creditors, a well positioned creditor, especially one with collateral, increases the chance that he may receive payment of some or all of his debt.
Q: Which types of bankruptcy cases provide for payments to creditors?
A: A Chapter 7 bankruptcy, also known as a “liquidation”, involves the sale of the debtor’s eligible assets to repay debt, but otherwise has no payment plan. A Chapter 7 debtor with no assets eligible for sale, the most common type, and also known as a “No Asset” case, involves no payments to any creditors.
Chapter 11 and 13 bankruptcies require payment plans which must be approved by the bankruptcy judge. Chapter 11 bankruptcies are usually filed by corporations or debtors with very large amounts of debt. Chapter 13 bankruptcies, also known as “wage earner” plans, are filed by individuals who have too many assets, or make too much money, to be eligible for Chapter 7 liquidation.
Q: How do I participate in a payment plan under Chapters 7, 11, or 13?