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Protecting your business if someone files bankruptcy

When consumers or other businesses file for bankruptcy, they are afforded a number of rights that are meant to help them come to appropriate arrangements regarding debt. For example, one of the protections of bankruptcy is known as the automatic stay. That means that whatever collections activity was occurring on most account must stop; a home in foreclosure cannot be foreclosed upon. Creditors can no longer pursue the debt via phone or mail or seek judgments, levies or garnishments while the bankruptcy filing is active.

That doesn't mean a creditor is without options for recovering at least some portion of the debt. How much of the debt you can recover depends on whether the debt is priority or secured, what type of bankruptcy the debtor files for and what type of income and assets the debtor has. One thing is usually true, though: Creditors must file a claim to receive any compensation through the bankruptcy process.

When the debtor files a petition for bankruptcy, the court sets a schedule. That schedule includes a meeting with the Trustee at which creditors can be present. It also includes a deadline for filing each type of claim. Failure to file your claim by the appropriate time could result in a total loss on the debt.

By working with an experienced business law attorney, you can ensure that you keep up with bankruptcy processes and file claims appropriately any time a person or entity owes you money. Keeping on top of these details helps you recover some portion of debts that would otherwise be a total write off. It also helps you know if the bankruptcy failed, so you can resume collection activities at the appropriate time.

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