Options for Getting Money from a Bankrupt Individual

If you are a creditor, you may face the issue of "how can i received money from a person who declare chapter 7". A chapter 7 filer will be insolvent in most cases. So, a creditor has limited options at best for collecting on debt unless it is secured debt.

Debt Collecting Options

A creditor's options for collecting a debt from an individual who files bankruptcy will depend on the circumstances of the case. If the individual who files includes the debt in question in the bankruptcy, the creditor must contest discharge of the debt at or before the meeting of creditors. Otherwise, the debt is likely to be discharged by the bankruptcy court. After a debt has been discharged, a creditor does not have a right to repayment any longer. Some reasons a debt may not be discharged include:

• The type of debt is not one which can legally be discharged through bankruptcy;
• The debt is secured by property that the debtor wishes to retain;
• The debt was incurred in contemplation of bankruptcy;
• The debt was incurred for unnecessary extravagances such as vacation; or
• The debt was incurred close in time to the filing of bankruptcy.

If for some reason a debt was not included in a bankruptcy case, the debtor did not properly file because all debts must be disclosed whether or not they are legally dischargeable under the bankruptcy code.

Regardless of the reason for a remaining debt after bankruptcy, the creditor's options include:

• Giving the debtor some time to recover from financial issues;
• Discussing with the debtor what terms would allow the debtor to begin to repay the debt; and
• Discussing with the debtor favorable terms on the debt such as reduced principal or reduced interest rates.

Some creditors choose to sell uncollected debts to junk debt purchasers for cents on the dollar. This may be an option if you do not wish to make any efforts to collect on the debt in the future.

Getting Legal Help

A lawyer who handles creditor cases in bankruptcy can help you assess your options as a creditor. If recourse is available, a lawyer can help you with it. If the debt is included in a bankruptcy, a lawyer can help you to argue that the debt should not be discharged for a variety of reasons. Because few creditors contest debt discharge, if you have a good reason for contesting a discharge, a court may find for you in the proceedings.