Can Creditors Recover Money in an Arkansas Chapter 7 Bankruptcy?
Whether Chapter 7 creditors can get all their money back during bankruptcy proceedings depends on their priority status, if any, and the debtor’s assets. Unsecured creditors –such as credit card companies– rarely recover all their money. However, certain secured and priority unsecured creditors might obtain some relief if they work with the dedicated Arkansas creditors’ rights lawyers at Brown Dunning Walker Fein Drusch PC.
Protecting Creditors’ Rights During Chapter 7 Proceedings
When qualifying debtors file for Chapter 7 bankruptcy in Arkansas, the court appoints a trustee to identify and liquidate the debtor’s assets. The debtor must identify all creditors during this process. Most creditors have 70 days from the date of filing to submit a proof of claim. After submitting their claims, creditors have the right to attend (or send an attorney) to the creditors’ meeting.
Creditors can ask the debtor questions under oath about his or her assets and financial affairs during this meeting. Having an experienced adversarial bankruptcy lawyer represent your interests is often crucial in uncovering hidden assets. By asking the right questions, your attorney might identify an unlawful property transfer or catch the debtor being untruthful. This could result in dismissal and the removal of bankruptcy protections.
Understanding Bankruptcy Creditor Priority in Arkansas
Whether creditors can recover their money in a Chapter 7 case generally depends on their priority status. Bankruptcy creditors fall into the following categories:
Secured Creditors
Secured creditors are those with loans secured by the debtor’s property–such as a home or vehicle. Secured creditors have priority rights to the proceeds from the sale of the secured asset, followed by any junior lienholders, such as judgment creditors with a lien on the secured property.
Priority Unsecured Creditors
Certain unsecured creditors have priority in the event the bankruptcy estate has additional assets. Priority unsecured debts include claims for child support and alimony arrears, most tax debts, wages owed to employees and contractors, administrative expenses, and judgments resulting from DUIs. These debts are paid in the priority order outlined in Section 507 of the 11 U.S.C.
General Unsecured Creditors
Unsecured creditors without priority split the remaining assets, if any, pro rata. Generally, unsecured debts include the following:
- Credit cards
- Personal loans
- Utility arrears
- Past-due rent
- Medical bills
- Litigation claimants
- Money owed to suppliers and vendors
Any dischargeable debts remaining once the debtor’s assets are liquidated and exhausted are then eliminated, which generally leaves creditors with no remaining legal recourse for recovering their money.
Arkansas Bankruptcy Lawyers Protecting Creditors’ Rights in ‘No Asset’ Cases
Most Chapter 7 bankruptcy cases are ‘no asset’ cases. This means the debtor will have no distributable money remaining after taking the Arkansas exemptions. Although not every debt is dischargeable, most priority and general unsecured creditors will not get any of their money back through bankruptcy.
The best option in ‘no asset’ cases is to work with a dedicated bankruptcy lawyer for creditors at Brown Dunning Walker Fein Drusch PC to file a proof of claim, challenge the case, and try to get the petition dismissed. Contact our Little Rock office at (501) 588-4460 or connect with us online to discuss recovering your money during Chapter 7 proceedings.