Have you ever wondered before how creditors get paid, especially when it comes to your bankruptcy case?
The good news (for the bankruptcy filers) is that in lots of Chapter 7 cases, creditors get nothing to be paid with since this chapter wipes out most of your debt and quite a bit of property is exempted. However, those property and assets you weren’t able to exempt on your own will be claimed non-exempt. This means, that such type of property will be sold by the court-appointed trustee and also distributed to creditors as cash repayments. To avoid such situations, you should file for bankruptcy together with an experienced attorney. Jack Setters’ guidance will help you to keep as much as possible, including your house, car and other valuable for you things.
How does the trustee determine how much to pay each creditor?
Before a creditor can be paid in a bankruptcy case, it has to complete and also submit a Proof of Claim form with the bankruptcy court. It is generally readily available on the bankruptcy court’s web site. The form requires that the creditor specify the name of the borrower, the case number, the financial institution’s name as well as address, and also the amount of the financial debt. The creditor has to also indicate whether the claim is secured or unsecured. Generally this implies whether the debt is protected by collateral, such as a home mortgage. The creditor has to submit a few other technical details, such as if the claim is entitled to priority payment over other financial institutions (such as if it is a domestic support obligation like child support).
Ultimately – and you should be aware of it – the creditor has to provide any type of documents that support its claim..
The creditor needs to finish the form and file it with the court by a target date established by the court.
Trustee’s Notice to File Proof of Claim
Typically, a proof of claim will only be submitted by a creditor if the trustee declares the case an “asset” case. Then the court will send out a notice to this effect that will include details concerning ways to file and the deadline.
Which Creditors Are Paid First?
The trustee gets to pay himself a little portion of anything he collects from the borrower. So this suggests that the trustee pays himself before all creditos. Then, priority debts are paid. Priority financial debts consist of residential support obligations; earnings, incomes, or compensations up to a particular quantity and gained within 180 days of the bankruptcy; payments to employee benefit plans; a particular amount of deposits for the purchase or service of building; and tax obligations and also penalties owed to governments. As soon as all the priority debts are paid, whatever’s left goes to the unsecured creditors (those without collateral), on a pro rata basis.
If you have to file for bankruptcy – consulting a professional attorney is a must. If you are in over your head financially and you are no longer able to stay on top of your bills, Jack Setters will help you find your way back to financial stability. Call us today to fight creditors back!