Rights of the Creditor in California Bankruptcy Claims
In a bankruptcy claim, the courts often look at the means of protecting the debtor from actions of the creditor in recovering their debts. As such, the debtor gets relief from the burden of repaying the creditor due to the automatic stay order that the bankruptcy claim institutes. In such an instance, the creditor becomes powerless against the debtor in recovering their debts.
Whether filing for Chapter 7 or Chapter 13 bankruptcy, what many people forget or just plainly overlook, is that the creditors have a right too. Thus they should not be seen as the villains in the entire situation as is most often seen in these situations.
Due to the circumstances surrounding bankruptcy proceedings, creditors in California are often wary of advancing an individual loans or property on loan terms, fearing the consequences when the debtor is unable to repay them. A primary win for the creditor though, is that the courts will consider their welfare when processing a bankruptcy claim.
In California, a debtor is allowed to file for either a Scheme 1 or Scheme 2 bankruptcy under Chapter 7 bankruptcy. In addition, they could file for Chapter 13 if they are deemed not viable for Chapter 7. A creditor is however allowed to challenge the debtor’s rights to discharge following a bankruptcy claim by their debtors.
The primary advantage would fall in a creditor with secured claims to a property in such an instance, with the courts awarding payment based on the deed agreements. Creditors with liens to the property are also entitled to receive value equal to the debt or collateral under California laws.
Also, the creditor would be in a position to stop a debtor from using cash collateral using secured debts following Bankruptcy.
If the creditor and the debtor fail to agree on the replacement value of the property, courts in California will accord the creditor a valuation hearing following debt redemption.
A creditor with unsecured debt, however, stands to lose out in case their debtor files for Bankruptcy. Courts in California and the country, in general, give the lowest priority to unsecured debts when dealing with a bankruptcy claim.
However, that is not to say that they will always lose out on their debts. As a citizen or business conducting operations in California, such a creditor will be accorded the right to file a proof of claim, attend meetings with creditors as well as to object to the discharge awarded to their client. Such measures serve to cushion the creditor from the adverse impacts of a bankruptcy claim by their debtor.