If you’re currently dealing with unmanageable debt and are looking into filing for bankruptcy, it’s important to understand your rights as the debtor. It’s equally important, however, to understand the rights of the creditors to whom you owe money. When you work with Belsky & Horowitz, LLC, we’ll explain those rights to you.
Before you can understand the difference in rights, you first need to make sure you understand the key differences between a creditor and a debtor. Essentially, a creditor is an entity or person that lends money or extends credit to another party. The debtor is the person that receives that money. Both parties agree to a lending arrangement that involves how repayment should occur. When a debtor defaults on the repayment plan, the creditor has the right to take legal action against them. When a debtor is completely unable to repay the debt, bankruptcy may be an option.
What Are Creditors in Bankruptcy Entitled To?
When a debtor fails to make payments, whether it’s for credit card bills, medical bills, or a mortgage, the creditor has the right to seek compensation. This typically starts with notices and phone calls to the debtor. If the creditor does not receive contact or payment from the debtor, they can send the owed amount to collections.
If the debtor files for bankruptcy, the creditors have certain rights and entitlements. For example, a creditor is entitled to share in any distribution from the bankruptcy estate. They are also allowed to be heard by the court in matters concerning the debtor’s repayment plan when Chapter 13 has been filed. Finally, a creditor is entitled to challenge an individual debtor’s right to discharge a particular debt.
Creditors’ Rights for Secured and Unsecured Claims
As mentioned, creditors have a right to be heard with regard to a debtor’s repayment plan under Chapter 13. The same goes for the liquidation of nonexempt assets in Chapter 7. It’s important to note that not all creditors are treated equally in a bankruptcy case. Entitlement to share in payment is based on the priority of the claim. Bankruptcy law tends to favor secured claims like alimony and child support.
In most cases, secured creditors have rights based on a deed of trust, a mortgage, a security agreement on personal property, or a judgment lien. Creditors with liens on property are entitled to receive value that is equal to the debt or the collateral.
Unsecured creditors, like those that hold medical bills or credit card debt, do not have the same rights. This has to do with the priority level. Many unsecured creditors will not be paid in Chapter 7, and they may not be entitled to be paid in Chapter 13. Payment depends on how many priority and secured debts the debtor has incurred.
A Debtors’ Right to File Bankruptcy
Consumer bankruptcy is a fundamental Constitutional right. Under Article I, Section 8 of the United States Constitution, Congress establishes the bankruptcy laws for the benefits of debtors who are United States citizens. The Bankruptcy Code is the uniform federal law that governs all bankruptcy cases. The Code helps people who can no longer pay their creditors get a fresh start by liquidating their assets or creating a repayment plan.
In Baltimore, bankruptcy cases are filed through the Edward A. Garmatz Federal Building and United States Courthouse.
Maryland Bankruptcy Exemptions
In Maryland, debtors who file bankruptcy have the right to keep certain property. Under Maryland Code, Court & Judicial Proceedings 11-504, individuals who file bankruptcy can retain a portion of the value of their home, vehicles, money payable in the event of sickness, accident, injury, or death, professionally prescribed health aids, household furnishings and goods up to $1,000, qualified retirement plans, and $6,000 in any cash or property.
Once a sheriff attaches or places a levy against property, the debtor has to notify the court within 30 days to claim their exemption. In the event a creditor attempts to go after exempt property, your lawyer can fight back and assert your rights.
Learn About Your Bankruptcy Rights in Baltimore
If you’re currently dealing with overwhelming debt and are considering your debt relief options, a bankruptcy lawyer from Belsky & Horowitz, LLC can help you review your options. If filing for bankruptcy is the route you choose, we can guide you through the process and make sure all the necessary documents are filed to get you one step closer to being debt-free.
With comprehensive knowledge of bankruptcy laws in Maryland, we are fully aware of your rights as a debtor. We will make sure you do not get taken advantage of by creditors during the process, so everything goes as smoothly as possible.
To learn more about filing for bankruptcy or to get started with the process, schedule a consultation with our firm today. We’ll go over your options and how best to proceed based on your financial situation.
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