Creditors FAQ

If you’ve received a notice that you are a creditor in a bankruptcy cases, you may be wondering exactly what that means. This FAQ will help you understand the basics of the bankruptcy process and your role in it.

What is bankruptcy?

Bankruptcy happens when a person or business (the debtor) is no longer able to pay their debts. Bankruptcy is a process supervised by one of the 90+ Federal bankruptcy courts that aims to return the most value to the creditors of the debtor.

How is bankruptcy filed?

Bankruptcy can be either voluntary or involuntary. In a voluntary bankruptcy, the debtor directly files a petition with the court, initiating the bankruptcy process. In an involuntary bankruptcy, one or more creditors of the debtor initiate bankruptcy; they are claiming that debtor is unable to pay their creditors and ask the court to initiate the process to help the creditors resolve the debt.

What is a creditor?

A creditor is someone (or some entity) that has a right to payment or other remedy against/from the debtor who is the subject of the bankruptcy filing.

What is the difference between chapter 7 and 11 bankruptcy?

Chapter 11 bankruptcy is often called “reorganization.” The debtor attempts to get some relief from their debt such that they can continue to operate and eventually emerge from the bankruptcy process better able to fulfill their financial obligations.

Chapter 7 bankruptcy is often called “liquidation.” The debtor (or creditors in the case of an involuntary bankruptcy) claims that they can no longer continue to operate as a business and ask the court to supervise the process of liquidating their assets to be distributed to the creditors.

What is the automatic stay?

This is an injunction that goes into effect automatically upon the filing of bankruptcy. It strictly prohibits the commencement or continuation of any acts to collect on a debt that arose prior to filing the bankruptcy. This includes enforcement of judgments, creating or perfecting liens, and many other actions. (It does not apply to collecting alimony maintenance and support).

In practical terms, it means that repayments of debts are temporarily suspended while everyone involved in the bankruptcy process figure out how to best handle the financial obligations.

What is the difference between a secured and unsecured creditor?

A secured creditor is a creditor who has obtained a lien on real or personal property either with the consent of the debtor, such as a mortgage, or involuntarily, such as a tax lien. Debts of this type include car loans, mortgages & other bank loans, equipment loans, tax liens and mechanics liens. A secured creditor has a priority on collection of its debt on the specific property on which it has a lien.

An unsecured creditor is a creditor who does not have a lien to secure repayment of its indebtedness. Debts of this type include personal loans, credit cards, cash advance or pay day loans, and accounts payable obligations.

If you are bankruptcy creditor, it is important to get involved in the bankruptcy process to make sure you maximize what you get out of it. For example, if you are owed more than the debtor has told the court, you need to inform the court of the true size of the debt. Getting involved in the creditors committee or unsecured creditors committee can insure that your voice is heard and that any settlement will be in your best interest.

What should I do if I am not listed as a creditor but I have a claim?

We suggest contacting both the case attorney (listed as Represented By) and the Trustee for the case (listed either as Trustee, U.S. Trustee, Assistant US Trustee) to inform them of your claim.

If you don’t inform the court of your claim, you are unlikely to get any money from the bankruptcy process.

What is the docket?

The docket is the play-by-play history of anything that happens in the case. For example, the docket will include:

  • Debtor financial information
  • Motions
  • Court orders
  • Court notices
  • The bankruptcy petition

How can help me as a creditor?

Being informed about the case is essential to insuring you receive the maximum compensation for your debt. Our single case subscription is ideal to track all the details of the case from start to finish.

  • List of other creditors so you can contact them easily
  • Contact information for all the players in the case, including the attorneys and trustees.
  • Nightly emails with updates to the case docket
  • Access to purchsse all court documents (each document can be purchased for a small fee and then repeatedly downloaded)
  • Access to the case petition at no cost.

The single case subscription is an inexpensive one-time fee1 and is available on any case page. If you are already a subscriber to our Starter, Standard, Pro, or VIP subscription plans, you can simply save a case to get all the same benefits of the single case plan.

1 As mentioned above, docket documents are not included in the subscription fee and must be purchased individually.