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Creditor Claims in Bankruptcy

Attorneys Representing Atlanta Businesses

Many business owners worry that they have no recourse for recovering the money they are owed from a customer or client that files for bankruptcy. While generally, a bankruptcy proceeding allows debtors to discharge their financial obligations, in some instances, there are measures that creditors can take to protect their interests. If a party seeking debt relief owes you compensation for goods or services, you should consult the dedicated Atlanta creditors’ rights lawyers of Poole Huffman, who regularly handle creditor claims in bankruptcy actions in Atlanta, Tucker, and Decatur.

Filing Creditor Claims in Bankruptcy

The first step a creditor should take in any bankruptcy action is to file a creditor claim with the court. Creditor claims in bankruptcy must be filed promptly. Otherwise, they may waive the right to receive payments. Then, the creditor must determine whether the debt owed is non-dischargeable. Examples of non-dischargeable debts include those incurred through fraud, misrepresentation or malicious acts, and certain debts acquired shortly before the debtor filed for bankruptcy.

In cases in which there is a dispute over how debt should be characterized, a creditor may be able to file a separate action, known as an adversary proceeding, in which the creditor challenges one or more of the debtor’s claims in the bankruptcy matter. In other words, a creditor may contest whether a debt is dischargeable, object to the discharge of a debt, or seek an injunction preventing a party from taking specific actions. Contact a creditors’ rights attorney in Atlanta to learn about the process for initiating an adversary proceeding. If the firm files a complaint and serves it on the debtor, the debtor will be required to file a response.

Under the Georgia Voidable Transactions Act, creditors can also file proceedings arguing that a transfer a debtor made prior to filing for bankruptcy was fraudulent and therefore is voidable. Generally, the transfer must have occurred within a certain time before the bankruptcy action was filed to be voidable. Creditors can attempt to locate assets by tracing transfers the debtor made shortly before seeking debt relief.

Preference Actions in Bankruptcy Cases

Under the preference provision of the bankruptcy code, a trustee may seek to recapture payments made by the debtor prior to filing for bankruptcy and then disburse the recovered funds to remaining creditors, purportedly in an effort to ensure creditors are treated equally. There are specific elements that must be present for a payment to be considered a preference. An Atlanta creditors’ rights attorney can explain how it must be a payment made to a creditor for a debt that was owed prior to the date of payment. It must also be paid within the 90 days prior to when the debtor filed for bankruptcy, when the debtor was solvent, and must constitute a higher amount than the creditor would have received in a distribution in a Chapter 7 bankruptcy proceeding.

Whether a preference action benefits a creditor will largely depend on whether the creditor is the party the trustee seeks to recover money from or is merely owed payments. Even if the trustee can establish grounds for a preference action against a creditor, however, there are numerous defenses a creditor may be able to assert. For example, if the creditor can show that a payment was made in the ordinary course of business, it may not be avoidable as a preference. Another available defense is that the creditor provided the debtor with new services or goods at the time the payment was made, which is known as a contemporaneous exchange. Lastly, a creditor may be able to argue that it provided a debtor with new goods or services after the transfer of funds in question, for which the creditor has not been paid.

Meet With a Dedicated Attorney in Atlanta

Bankruptcy proceedings can wipe out the majority of a person’s or company’s debts, and if parties that are owed money do not act promptly, they may waive the right to receive any payments. If a party that owes you money filed for bankruptcy, it is critical to speak to a lawyer as soon as possible regarding your options. In Atlanta, the creditors’ rights lawyers of Poole Huffman can advise you of your options and assist you in seeking the best outcome available under the facts of your case. We routinely assist creditors in bankruptcy actions in Atlanta, Decatur, and in Tucker, where our office is located. We also frequently pursue creditor claims for clients in cities throughout Fulton, DeKalb, Cobb, and Gwinnett Counties. We can be reached at 404-373-4008 or via our online form to schedule a meeting.

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