Pub. 1 2021 Issue 3

8 | The Show-Me Banker Magazine LEGAL EAGLE SPOTLIGHT Camber Jones Spencer Fane LLP Experts 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 1 Chapter 7 Chapter 7 is a “liquidation” bankruptcy. During a Chapter 7 case, a bankruptcy trustee gathers and sells a debtor’s nonexempt assets and distributes proceeds to creditors. Where there are no nonexempt assets available for sale, unsecured creditors do not receive distributions. Secured creditors generally retain their valid liens and the ability to enforce them after a bankruptcy case concludes. Chapter 11 Chapter 11 is a “reorganization” bankruptcy. In these cases, the debtor, acting in a fiduciary capacity as a “debtor- in-possession,” typically maintains possession and control of its assets and continues to operate its business during the reorganization process. Often, a creditors’ committee is appointed to represent the interests of unsecured creditors. THE COMING BANKRUPTCY WAVE: A BANKRUPTCY OVERVIEW FOR CREDITORS “Creditors should determine whether their debt is secured, confirm the status and location of any related collateral, and file a timely and complete proof of claim. ”