Like every U.S. citizen, residents of Tyler, Texas, want to lead comfortable lives. They work hard to reach their financial goals so that they can buy their dream home or dream car. Some Texans use credit to help achieve their financial goals.
However, sometimes unforeseen circumstances can derail financial calculations and a person may not be able to make regular payment to creditors. Falling behind in agreed-upon payments can lead to creditor harassment and to creditors initiating legal proceedings to recover money owed.
Like a debtor who can file bankruptcy to get relief, a creditor also has certain legal rights after a debtor files bankruptcy. Creditor rights entitle lending institutions to recover money from the debtor following the legal procedure.
After a bankruptcy filing, a debtor needs to attend the 341(a) meeting with the bankruptcy trustee where the person will be examined under oath. A creditor can also join this meeting to ask the debtor or debtors questions related to their financial affairs. After a creditor files a proof of claim, which is a written statement identifying the amount and basis of a claim, a creditor may be entitled to the owed amount as per provisions of various bankruptcy options and the appointed U.S. bankruptcy trustee who will administer the case.
After a plan has been confirmed, payment is then distributed to creditors in a Chapter 11 or Chapter 13 case. In a Chapter 7 case, the trustee will liquidate assets, if there are non-exempt assets available for liquidation, and will decide distribution of assets after reviewing all claims and expenses. The trustee will also need to file a distribution report to creditors who have filed claims with the distribution report detailing how assets will be distributed and percentage of recovery for each creditor.
Source: United States Bankruptcy Court -- Western District of Texas, "Creditor Frequently Asked Questions," Accessed on Feb. 6, 2015