The role in which creditors play varies not only from bankruptcy case to bankruptcy case but also to which type of bankruptcy case is being filed. Chapter 7 bankruptcy is the oftentimes the simplest and quickest type of bankruptcy to file and is also referred as “straight bankruptcy” or “liquidation.”
The creditors in a Chapter 7 bankruptcy case are at a greater disadvantage than the creditors in a Chapter 13 bankruptcy case. With a Chapter 13 bankruptcy the creditors have a stronger chance of recouping their losses because Chapter 13 requires the debtor to pay back the loan under a three to five year repayment plan. But with a Chapter 7 bankruptcy the debtor only has to pay whatever assets come out of the liquidation process.
Chapter 7 Creditors Further Explained
As hinted above, Chapter 7 is much quicker and simpler than Chapter 13 because in the majority of Chapter 7 cases the consumer’s exempt assets far exceed their non-exempt assets. This means that oftentimes the debtor in a Chapter 7 bankruptcy case will get out of it relative unscathed. The consequence of getting to keep most if not all of your assets after a Chapter 7 bankruptcy is that you will leave plenty of unhappy, unsatisfied creditors in your wake.
Some creditors will simply cut their losses and move on but there are plenty of creditors who will not go quietly into that good night without putting up a fight. Creditors who are unhappy with the debtor’s exempt assets are able to challenge the merit of those assets in the bankruptcy court. If the debt is a dischargeable one then the creditor may be out of luck if the judge reinforces the debtor’s exempt assets.
Talk to a licensed bankruptcy attorney in your area today about the role that creditors will play in your Chapter 7 bankruptcy case.
