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What Are The Rights of Creditors?

Effective debt collection is integral to the financial health and viability of any business. Fortunately, when bills pile up because creditors can’t collect the money they’re owed, the law provides a range of rights, like the ones below, to help make certain that they recover the money they are entitled to:

What Should I Do If I Can’t Collect?

In general, the type of debt you are owed will determine your specific rights as a creditor.

Collecting Secured Debts

If you’re a secured creditor, you may recover the asset that secures the debt by foreclosure or repossession. Repossession is used to recover outstanding debt if the secured property is a motor vehicle, major equipment, or costly furniture. If a piece of real estate secures the debt, you can file for foreclosure to recoup the outstanding debt from the sale of the foreclosed property.

Collecting Unsecured Debts

Unsecured debts are debts not secured by any assets, such as utility bills and credit cards, among others. Securing repayment for unsecured debts poses unique challenges compared to debts backed by collateral, such as real estate or vehicles. Typically, the first steps to collecting unsecured debts involve sending reminder invoices and demand letters.

If the debtor ignores your collection attempts, you can opt to hire a lawyer to attempt to collect the debt or a debt collection agency. If necessary, you can file a lawsuit against the debtor and then let the court decide on the matter.

What If The Debtor Is Bankrupt?

If the debtor has filed for bankruptcy, you have certain protections under the law. During bankruptcy, the debtor will be ordered to pay off certain debts before they can discharge other debts. Consequently, certain creditors are legally entitled to a portion of the debtor’s bankruptcy estate. However, take note that the priority the law provides to creditors will determine whether or not a certain creditor must be repaid.

Secured debts are the top priority in bankruptcy cases. Keep in mind that while the debtor can discharge many types of debts during bankruptcy, any security interest or lien on the debtor’s property will not be eliminated. This means a creditor can seize or foreclose on the property if there’s a lien on it and the debtor can’t repay the debt. Alternatively, if the property is sold during bankruptcy, creditors with secured debts must be paid first before the other creditors.

If you need assistance with collecting a debt, reach out to the creditors’ rights lawyers at Brown Dunning Walker Fein Drusch PC to understand your legal rights as a creditor and determine the most suitable options for your specific situation. We regularly work with various creditors, such as businesses, banks, credit unions, and lending institutions, among others. Learn how our creditors’ rights lawyers can help by scheduling your consultation online or by phone at 303-329-3363 (Colorado) or 501-588-4460 (Arkansas).