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Things a Creditor Needs to Know About Bankruptcy

When an individual bankruptcy case is filed, the bankruptcy court sends notice to all creditors listed in the debtor’s petition. Receiving one of these notices generally prompts many questions. Below are a few of the most common questions and answers:

Q.Will I get paid?
A.This is the most common and the most important question to a creditor. Unfortunately, it is also the most complex. In very general terms, if the debt is secured by property (such as a house, a car, etc.), the debtor must either pay the debt or return the property. If the debt is unsecured (like a personal loan), disposition of the debt will largely depend on the debtor’s ability to repay the debt.

Q.What if I don’t get notified of the bankruptcy case?
A.The Bankruptcy Code excludes an unlisted debt from discharge if the failure to list the debt prevented an opportunity to file a claim or object to the discharge of the debt. However, many courts cite the “no harm, no foul” rule. If the unlisted debt was an honest mistake, there was no reason to exclude the debt on other grounds, and the creditor would not have received any relief from the court (money or other), these courts find that the unlisted debt is included in the discharge.

Q.Should I attend the 341 meeting?
A.The 341 meeting of creditors is an opportunity for the bankruptcy trustee and creditors to ask the debtor questions regarding income, expenses, assets, debts, and financial transactions. Most creditors do not attend the 341 meeting. That said, the 341 meeting is a good time to learn more about the case and whether there are available assets or excess income to pay debts.

Q. Do I need a lawyer to represent me?
A. Obviously, an attorney is always recommended whenever you face an important legal matter. A legal consultation can aid you in determining whether it is a good idea to incur the expense of hiring an attorney. How you proceed as a creditor in the case can vary widely: from doing nothing to actively opposing the debtor’s discharge.

Q. Can I continue my lawsuit for eviction, child support, or personal injury?
A.The general answer is “no.” Actions to collect a debt from the bankrupt individual are immediately prohibited once the bankruptcy case is filed. This prohibition continues until the case is discharged or dismissed, or the bankruptcy court grants permission to continue the suit.

Q. I know the debtor is lying or concealing assets. What should I do?
A. The bankruptcy process relies on the honesty of the participants to function properly. Fraud should be reported to the local U.S. Trustee. You can also send information of fraud via email to: or by mail to:

Executive Office for U.S. Trustees
Office of Criminal Enforcement
441 G Street, NW
Suite 6150
Washington, DC 20530

If you are considering filing for bankruptcy please call the experienced attorneys at Fears | Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to