FOBB: When you discover that you are a creditor in a bankruptcy case – by Bill McLeod, Esq.
Tuesday, November 17th, 2009
"So I ran into Bill in the clerk's office in Boston recently..."
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Bill McLeod is a Boston-based bankruptcy attorney, representing creditors and debtors with over 15 years of experience. You can learn more about this and read more of his blog posts at www.mcleodlawoffices.com. Follow him on Twitter. Find him on Facebook.
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When you discover that you are a creditor in a bankruptcy case…
Bill McLeod, Esq.
Recently, I was in the clerk’s office in Boston and overheard two people ask the clerk which forms needed to be filed in a bankruptcy case. But this person was not a debtor – they were a creditor. Their landlord had filed bankruptcy. The former tenant was looking for their security deposit back, and was going to sue the debtor in small claims. I couldn’t help myself – and I butted in.
“You need relief from the automatic stay.”
“The stay applies even to me?” one asked.
“It applies to everyone.”
After that short exchange, I thought I would put together a short checklist of things to do when your landlord – or someone else you know who also happens to owe you money – files a petition seeking bankruptcy protection.
• Don’t panic.
People have the right to seek bankruptcy protection. Simply because they do does not mean that you’re not going to get paid. On the other hand, simply because I am encouraging you not to panic should not be read to mean that you are going to get paid. But still, don’t panic. In my experience, panic can lead to actions that can get you into more trouble…such as violating the automatic stay…so with that said…
• Don’t violate the automatic stay.
The automatic stay applies to all creditors. It does not matter if you’re a big bank or a friend or neighbor of the debtor, the same rules apply. There are very limited exceptions to the automatic stay and you should not assume that you fall under one of those exceptions.
If you know that someone has filed bankruptcy, do not call the debtor and ask about payment. Do not send them a letter. Do not sue them – even in small claims court. Don’t assume that just because you heard about it from a third party and did not receive any written notice does not mean that the automatic stay does not apply to you. Stay violations can be costly. Willful violations of the stay can be very costly.
Call an experienced bankruptcy attorney to determine what your next course of action should be (such as filing a motion for relief from the automatic stay). And remember, the court clerk’s office cannot give you legal advice.
• Consult with an attorney.
At a very minimum, talk to a bankruptcy attorney. Be prepared to explain the basis of your claim against the debtor and why (more…)
