What should a secured creator do during a bankruptcy?

As a secured creditor, there are certain things you should do if one of your customers files bankruptcy to be certain your interests are being protected.

Hire an Attorney

While unsecured creditors may be able to muddle through a bankruptcy without an attorney, a secured creditor really needs the extra protection a lawyer offers. Most business owners are not knowledgeable in the bankruptcy process and do not know what needs to be filed or when an objection should be made.

File a Proof of Claim

The proof of claim is the document that tells the court you are a creditor, how much you are owed, what interest rate you should be paid, and your contact information. You want to file this document within the timeframe allowed or the debtor will have the option to file it for you. If the debtor files it, you may not be paid what is set forth in your contract.

Object to the Plan

If your loan is not dealt with properly in the plan, you should object to it. All objections must be resolved before a plan can be confirmed; therefore, by filing an objection, you keep the debtor from having the plan approved.

Monitor Plan Payments

Keep an eye on the debtor’s plan payments to be certain they are being made on time every month. If they are not, you have grounds to file an objection to the confirmation of the plan. If the debtor cannot afford to pay the plan payment, they are unfairly delaying the case and wasting the creditors’ and the court’s time.