What Should Creditors Do When a Debtor Files For Bankruptcy?

 Posted on March 11, 2025 in Bankruptcy

If one of your debtors has filed for bankruptcy, you will receive a formal bankruptcy notice. This notice will inform you of your debtor’s bankruptcy and lay out important deadlines that may apply to you in the bankruptcy proceeding. There are a number of steps you should take when you receive notice that a debtor has filed for bankruptcy in order to protect your interests as a creditor and improve the chance that you will recover on this debt. An experienced Chicago, IL creditor’s rights attorney can advise you on the steps to take to protect your rights when your debtor files for bankruptcy.

Pin Down the Debt and the Debtor

Sometimes it may not be immediately clear from the notice of bankruptcy who is the actual debtor, if the debtor is operating under a different name or parent company than the client who owes your business money. First of all, do some research to determine exactly who the debtor is, how much money they owe you, and when the debt was incurred. 

Comply with the Automatic Stay

The automatic stay stops you from undertaking the vast majority of collection efforts once a debtor files for bankruptcy. Contact any third-party collection companies you may have hired to collect on this debt, inform them of the automatic stay, and tell them to stop collections. Any violation of the automatic stay can result in serious consequences for you, such as fines or even a contempt order. 

File a Proof of Claim

The proof of claim form attests to your rights as a creditor. Filling out this form ensures that you are able to receive distributions from the debtor’s estate in bankruptcy. It is especially important to file a proof of claim if you are an unsecured creditor, if your claim is not listed under the debtor’s schedule of debts, or if it is a disputed debt. Provide as much documentation as possible for this proof of claim. 

Monitor the Bankruptcy Case

As a creditor, you will receive notifications from the bankruptcy court throughout the process once you file the proof of claim. Make sure to respond as required, and to have your creditor’s rights attorney review any notices to determine the best course of action to recover the debt. If all goes well, you will be repaid this debt, but please note that bankruptcy courts pay certain debts before others. Secured debts and administrative fees come before unsecured debts, for example. That is why it is crucial to speak to a creditor’s rights attorney to represent your rights in the bankruptcy. 

Call a Chicago, IL Lender and Creditor Bankruptcy Attorney 

If you have received a notice of bankruptcy, you may be concerned about your chances of recovering on this debt. Additionally, you will want to know how best to proceed to safeguard your rights and increase the chances of recovery. The experienced Chicago, IL lender and creditor bankruptcy attorneys at Dimand Walinski Law Offices, P.C. are here to assist you. Call our offices at 312-704-0771 for a consultation.