Pub. 10 2021 Issue 3

20 The Coming Bankruptcy Wave: A Bankruptcy Overview for Creditors By Camber Jones, Spencer Fane E xperts predict a continuing rise in bankruptcy filings as COVID-related debt relief expires. This article is intended to provide creditors with a brief bankruptcy overview, including the most common types of bankruptcy cases, to enable them to more confidently participate in the bankruptcy process. Of course, bankruptcy is complex, and each case is uniquely nuanced. Creditors should contact a bankruptcy attorney for assistance in responding to specific bankruptcy filings. 1. The Petition Every bankruptcy case is initiated by filing a bankruptcy petition. A debtor who files under any chapter of the Bankruptcy Code is required to file certain statements and schedules outlining its financial condition, including secured and unsecured debts. Creditors should review a debtor’s petition, statements, and schedules to gain insight into, among other things, the debtor’s intentions with regard to their debts and related collateral. 2. The Automatic Stay The filing of a bankruptcy petition triggers an injunction called the “automatic stay,” which temporarily halts most collection actions against a debtor or a debtor’s property. It is imperative that creditors not violate the automatic stay. When a creditor receives notice of a bankruptcy filing, it should immediately cease all actions against the debtor, including wage garnishments, collections, foreclosures and repossessions. 3. Common Bankruptcy Types Chapter 7 Chapter 7 is a “liquidation” bankruptcy. During a Chapter 7 case, a bankruptcy