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What Creditors Need to Know About Collecting Debt in State Court and Bankruptcy Court?

Categories: Business, Bankruptcy, Blog

Video Transcript:

What do Creditors Need to Know about Litigation in State Court?

When proceeding in state court, or where a company hasn’t filed for bankruptcy protection, there can be many issues. It depends if the creditor has an unsecured debt, meaning there is no collateral, or if the debt is securing, meaning there is collateral. In either case, a creditor needs to have good documentation, good records of their attempts to try and collect their debt, whether telephone call logs, writing down contemporaneous notes to when they are talking to the debtor, or copies of emails or letter; anything a creditor has for records help attorneys like me attempt to collect their money for them.

What do Creditors Need to Know about Proceeding in Bankruptcy Court?

When a creditor is owed money by a company or individual who has filed bankruptcy, it is a whole different brave new world. The rules are different than in state court. There is the “automatic stay”, which is a creation of the Bankruptcy Code (federal statutes) and which arises when bankruptcy is filed It stops all collection actions, including state court lawsuits, once a bankruptcy is filed. Depending on whether you are a secured creditor, meaning you have collateral, or you’re an unsecured creditor, you will have different rights, positions, and options to take under the Bankruptcy Code. Because of this, again, the best thing a creditor can do is have very good documentation of your interactions with the debtor that can be provided to your attorney, which will allow your attorney to give you advice to put you in the best position to hopefully recover either money and/or your collateral.


About the author: Neal H. Bookspan is a partner at the Phoenix, Arizona law firm of Jaburg & Wilk. He assists clients with business issues, commercial litigation, workouts and bankruptcy litigation.