Creditors in Bankruptcy


The credit industry wants to discourage you from filing bankruptcy. In an effort to collect on debts, creditors can be aggressive, rude and frequently try to frighten hardworking people. In many instances creditors have options for responding to a bankruptcy but they often give up as soon as they discover a bankruptcy has been filed.

Did You Know?

  • A majority of individuals who file for bankruptcy do not lose any of their belongings — Creditors would like you to believe that if you file bankruptcy, you will lose your house, your car and all your personal belongings. The truth is that a majority of petitioners retain all their property.
  • After you file bankruptcy, creditor harassment must stop— Once you file, an automatic stay goes into effect, prohibiting creditors from contacting you.
  • You have the power to stop a home foreclosure — Filing bankruptcy halts all foreclosure actions, giving you room to breathe.
  • You can rebuild your credit — Once your debt is discharged, you will be able to work on repairing your credit score. Many people get approved for a secured credit card or loan within a year after filing bankruptcy. You may even have the ability to avoid high interest rates.
  • Most people filing bankruptcy are good people who have fallen on hard times — The credit industry would like you to believe that only deadbeats file bankruptcy. However, a large number of petitioners got into financial trouble because of job loss, divorce or unforeseen medical expenses.
  • Bankruptcy offers the best solution to obtain a fresh start after suffering from a financial hardship — Bankruptcy is usually a one-time, one-fee proposition. Your fresh start begins immediately after filing bankruptcy in Alabama.

Non-Dischargeable Debts

A creditor can seek a judgment to keep the debt from being discharged. A complaint must be filed with the bankruptcy court within 60 days from the first date set for the creditor’s meeting.

Generally, the claim or debt must fall into one of several categories:

  • the debt was obtained through fraud on the part of the debtor;
  • the debtor embezzled assets or breached his fiduciary duty to the creditor; or
  • the debtor is liable for willful and malicious injury to the creditor or his property.

Objection to A Discharge

If the creditor is successful, the debtor is denied a discharge of the debts owed at the time of the bankruptcy.

There are several grounds for objecting to a debtor’s discharge, including:

  • debtor failed to keep and produce adequate financial records;
  • debtor failed to explain satisfactorily a loss of assets;
  • debtor made a materially lie or false statement in his bankruptcy papers;
  • debtor failed to obey a lawful order of the bankruptcy court; or
  • the debtor fraudulently transferred, concealed, or destroyed property of the bankruptcy estate.

Other Creditor Options

A creditor has other options including:

  • Relief from the automatic stay;
  • Low dividend Chapter 13 plans; or
  • Repetitive Chapter 13 petitions;
  • Creditor not listed in plan.

Ferguson and Ferguson Can Help

To learn more about bankruptcy and how the process works, come in today for a free consultation with one of our experienced bankruptcy attorneys. Call 256-534-3435. We are here to help.

Huntsville Office Location:
303 Williams Avenue SW
Suite 321
Huntsville, AL 35801

Decatur Office Location:
211 Oak Street NE
Decatur, AL 35601