What To Do About a Bankruptcy NoticePosted on September 25th, 2010 William No comments
A bankruptcy notice (technically, a "proof of claim form") lets you know that someone who owes you money has filed for bankruptcy, and gives you a deadline by which to reply if you wish to file a claim against the debtor's assets. It is sent by the court to every creditor the debtor has informed the court of (presumably all creditors, since only the listed debts will be discharged).
How likely you are to actually get paid depends on the type of bankruptcy. In a chapter 7, where most debts are discharged, assets may be discovered that can be used to partially pay off the debts, but generally you're unlikely to receive much. In a chapter 13, the debtor's payment plan will require him to pay you at least part of what you're owed. In either case, if you can show that you have security in some asset, this will move you to the front of the line to get paid.
Once you have the notice, if you're owed enough for it to be worth your time, you need to file a proof of claim to be included in the bankruptcy proceedings and collect whatever portion of the debtor's assets you're entitled to. The notice also lets you know that you can no longer attempt to collect the money owed, as the debtor is now under bankruptcy protection.
In some cases, it's possible that the bankruptcy notice may reach you after the deadline has already passed. According to section 342(g) of the United States Bankruptcy Code, notice given is not effective notice until it is brought to the attention of the creditor, which means that if the notice does not reach you due to being sent to the incorrect address or similar reasons, you may be able to dispute the missed deadline.