Bankruptcy Notice

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The term “notice” is important in bankruptcy law, with two very different meanings depending on who is sending and who is receiving it.

Notice from Debtor to Creditor

A bankruptcy notice or court notice is a document sent from the bankruptcy court to the debtor’s creditors—or at least all the creditors which debtor has informed the court of. (Smart or careful debtors will inform the court of all their creditors, to make sure all outstanding debts can be resolved in bankruptcy.)

The goal of bankruptcy to give the debtor a fresh start, while making sure he pays his creditors as much as possible. Towards that end, creditors have the right to provide input into the bankruptcy process—to make sure that all debts to them are considered, to object to plans they feel are overly generous to the debtor, or to show that they have a security interest in some asset(s).

The bankruptcy notice from the court is a key part of doing this. It will provide creditors with the information they need to stake their claim, such as: the court and the case number; information identifying the debtor; the date the petition was filed; the location, date, and time of the creditor’s meeting; time for filing objections and the time for filing proof of claims; and whether there are potentially any assets to be distributed (Chapter 7 bankruptcy).

What Should Creditors Do After Receiving a Notice

Basically, the creditor has two options. First, if the claim is sufficiently small, the creditor may elect to ignore the court notice of the debtor’s bankruptcy—it’s not worth the creditor’s time. Second, the creditor can file a proof of claim, in order to be included in the bankruptcy and receive a part of whatever payments or distributions may be made.

The creditor cannot keep trying to collect: once a bankruptcy filing is made, collections efforts are stayed, or paused. The bankruptcy notice will usually state this, so that creditors know they can no longer try to collect.

Notice From Creditor to Debtor

The two common notices sent by creditors to the debtor are a payment notice (also called simply “pay notice”) and a collections notice. They both amount to the same thing: a notice that money is owed and a demand that the debtor pay it. However, in no event can they be sent out after receipt of the bankruptcy notice. During the bankruptcy proceedings, as mentioned above, collections efforts are stayed; and after bankruptcy, debts that were included in the bankruptcy filing (which are the debts for which creditors would receive bankruptcy notices) are discharged. So sending payment or collection notices after receipt of a bankruptcy notice is improper—the creditor (if it wants to pursue the debt) should be filing a proof of claim.

How a Bankruptcy Attorney Can Help

You can get a notice form or proof of claim form from the court or from a number of different websites, publishers, or services. However, having a form by itself is often not enough: bankruptcy filings and responses can be fairly technical. An attorney can make sure that all forms are filled out correctly, and any claims that a creditor wants to pursue are properly documented and established.