Defending Creditors in Chapter 7

The unsecured creditor in a Chapter 7 is in a difficult position. If there are no assets in the Chapter 7, the creditor must determine how much he wishes to invest in legal fees to avoid being discharged or to locate funds that will fall into the bankruptcy estate and thereafter be distributed among all of the creditors.

Another option for the creditor is to challenge the Chapter 7 as a whole .

Of course, the downside for the creditor in the Chapter 7 is that in most cases recovery is almost always in the future, because if the creditor is successful, the debtor is still insolvent and the creditor must wait until he debtor has non-exempt assets to pay.

The secured creditor in a Chapter 7 retains his interest in his collateral as long as that interest was properly perfected (recorded) before the bankruptcy was filed or is otherwise effective after the bankruptcy was filed.

Alimony and child support creditors in Chapter 7's are generally protected by the statutes and need to little, unless the divorce decree contains non-standard language or unless the community property settlement occurred within 90 days of the commencement of the bankruptcy.

Are you a landlord? Do you have a contract for deed signed by the debtor? Do you have a mortgage note signed by the debtor? These can be problematic in Chapter 7 bankruptcy proceedings.

Charles Chesnutt