"Creditors' rights" collectively refers to the procedural
rights and remedies designed to protect the ability of creditors to collect
the money that they are rightfully owed. Creditors' rights deal not
only with the rights of creditors against the debtor, but also with the
rights of creditors against one another. Where multiple creditors claim
an interest in the same property, or against the debtor's accounts
in general, the rules governing creditor's rights determine which
creditor has the superior right to any particular relief. Generally, creditors
can be divided between those who "perfected" their interest
by establishing an appropriate public record of the debt and any property
claimed as collateral for it, and those who have not.
The Importance of Creditors' Rights in Bankruptcy Cases...
Creditors' rights are instantaneously impacted by the filing of a bankruptcy
petition. Upon receipt of notice of a bankruptcy filing, it is of paramount
importance for the creditor to quickly identify the specific type of relief
being sought by the debtor, and in response thereto, determine what rights
may be available to the creditor within the context of the debtor's
bankruptcy case. The creditor must then act proactively to protect and
prosecute those rights within the bounds of bankruptcy law and procedure.
These rights include, but are not limited to, the right to share in any
distribution from the bankruptcy estate (if available and depending on
the chapter under which the bankruptcy petition was filed), the right
to challenge a debtor's plan of reorganization, and more broadly,
the right to challenge the debtor's right to a general discharge or
discharge of a particular debt.
There are numerous rigorous deadlines imposed by the bankruptcy court within
which creditors are required to take certain actions to preserve their
rights. A creditor's failure to strictly adhere to these deadlines,
even if by reason of mistake or inadvertence, can lead to devastating
results. For example, a so-called "proof of claim" must be timely
filed if a creditor is going to be paid out of non-exempt assets of a
bankruptcy estate. The claim must be supported by attaching copies of
any contracts or judgments concerning the claim, or a summary of the claim,
if the supporting documents are voluminous to the proof of claim form.
Another deadline is imposed upon creditors who seek to file an action in
the bankruptcy court to determine the creditor's right to challenge
the right to receive a discharge in general or the debtor's right
to discharge the debt owed to that particular creditor. This process of
mounting a challenge is accomplished through what is commonly referred
to as an "adversary proceeding." Yet another deadline is set
for creditors who wish to contest the legitimacy of a debtor's reorganization
plan under Chapter 11 or 13 where certain assets have been concealed,
transferred, or undervalued, or who wish to contest the feasibility of
the reorganization plan where the debtor is unrealistic about the prospects
for its success.
David M. Baker, Esq.-
your Massachusetts and Rhode Island Creditors' Rights Law Attorney!
schedule your case evaluation? Simply
call our firm today.