S.B.S. can monitor the status of the bankruptcy, file a Proof of Claim, and more.
Types of Bankruptcies
There are five (5) types of bankruptcies, known a Chapters 7, 9, 11, 12 and 13. These Chapters are from Bankruptcy Code 11 USC 362.
Chapter 7 – This is one of the two most commonly filed bankruptcies. This is usually a straight forward process and last for about five (5) months. The debtor is saying to the court and its creditors it has no money to pay off its debts and asks the court to discharge all of its unsecured debt and personally relieve its responsibility to all of its pre-petition debt. Proof of Claim is not to be filed unless notified that the case is an Asset Case.
Chapter 13 – This is a reorganization bankruptcy in which the debtor retains his property and seeks approval of a payment plan (Chapter 13 Plan) through the bankruptcy court to pay off the pre-petition debt. This type of bankruptcy can last for 3 to 5 years. A Proof of Claim should always be filed.
Chapter 11 – This bankruptcy is used by an entity or person with an operating business. This type of bankruptcy can be seen as a combination of a Chapter 7 and a Chapter 13. There may be a liquidation of assets to pay creditors but also a plan is made to do so as well. Debtor is in Possession of assets instead of a bankruptcy trustee.
Chapter 9 – Bankruptcy used by municipalities – a political subdivision or a public agency.
Chapter 12 – This bankruptcy is used for family farmers and fishermen. This is similar to an 11 in that the debtor reorganizes and pays off debt from future earnings. The debtor maintains its assets.
Relief from the “Automatic Stay”
Communication with Debtor
Payments Received during a Bankruptcy
Payments received during a Chapter 7 should not be accepted. However, if the discharge has been entered the payment can be applied to the post-petition (after the bankruptcy filing date). It is good to get the approval of the attorney for the debtor to take in such payments.
In a Chapter 13 bankruptcy, it should be determined first who is sending the payment. Payments received from the debtor should be applied only to the post-petition assessments. Payments received from the Chapter 13 Trustee should be applied to the pre-petition account.
How Bankruptcy Effects Foreclosure
If there is no lien filed prior to the bankruptcy filing and a discharge has been granted the pre-petition debt (debt owed prior to the filing of the bankruptcy) is discharged and no collection of that debt can be made. If there is a lien recorded before the bankruptcy filing the debt is secured and not discharged.