What are the disadvantages of being an unsecured creditor in bankruptcy?
Disadvantages of Being an Unsecured Creditor in Bankruptcy
Unsecured creditors face a number of disadvantages when dealing with bankruptcy. These disadvantages include the potential loss of business assets and employment opportunities, as well as non-dischargeable debts. To learn more, read the following article.
Disadvantages of being an unsecured creditor in a bankruptcy
Being an unsecured creditor in bankruptcy can have its disadvantages. One disadvantage is that you don't hold a lien on your debtor's property. A secured creditor, on the other hand, has priority over unsecured creditors when it comes to collecting debt. This means that you'll have to file a lawsuit to collect your debt if your debtor doesn't pay you.
An unsecured creditor in bankruptcy is not entitled to distributions. In most cases, unsecured creditors do not receive any kind of notice unless they are scheduled creditors. Those creditors will be notified of the bankruptcy filing and the first meeting of creditors. In some instances, unsecured creditors have the option to continue with court action if they can prove their claim.
Forfeited business assets
As an unsecured creditor in bankruptcy, your debts cannot be repaid until you have sold all of your assets. That means that if your business depends on the equipment, your business may have to close. In addition, if you have personal debts, your creditors can seize your personal assets in bankruptcy. Although filing for bankruptcy may seem like a drastic step, it can save your business and your financial future.
Non-dischargeable debts
Bankruptcy is a legal procedure in which a debtor can wipe out most of his debts. In addition, it can help him avoid wage garnishment. Bankruptcy also stops lawsuits and prevents constant contact with creditors. However, there are some debts that are not dischargeable through bankruptcy. These include most credit card debts, medical bills, and past-due accounts. Nevertheless, bankruptcy can be a good solution for many people and is a good way to get a fresh financial start.
There are several categories of non-dischargeable debts that a debtor may still try to collect after bankruptcy. While some debts cannot be discharged, others are subject to a hearing and will be dismissed if the creditor does not contest their dischargeability. If a creditor challenges the dischargeability of a debt, the bankruptcy court will determine whether it is a valid debt and whether the debt should be eliminated.
If you have any questions, you can get a free consultation with Ascent Law LLC:
Ascent Law LLC:
8833 South Redwood RoadSuite C
West Jordan, UT 84088
(801) 676-5506
