Bankruptcy can be a confusing and overwhelming process. In addition to dealing with all the forms, the deadlines, the costs and the laws, there are many people involved in this process that you may be unfamiliar with. Here is a basic Who’s Who of Bankruptcy:
Debtor: This is the person filing for Bankruptcy protection. Saddled with debt beyond the ability to pay, this person is asking the court for a clean slate or a manageable reorganization and payment plan. Ideally, this person is represented by an attorney.
Secured Creditors: These are parties that have lent money to the debtor in exchange for a security interest in the property of the debtor. The classic example is the home mortgage lender or your car loan holder. If the debtor defaults on these loans, the Secured Creditor has a right to foreclose on the house or repossess the car that the debtor loaned the money against. In Bankruptcy, these creditors have a higher priority over an Unsecured Creditor.
Unsecured Creditors: These are parties who have lent money without any sort of security agreement. The classic example is the Credit Card Company. They have lent the money to the debtor in exchange for only a promise to pay it back. Since there is no security in these loans, they have a lesser priority than the lenders that do have security. Thus, Unsecured Creditors are more likely to lose out in a Bankruptcy.
Assistant U.S. Trustee: The Trustee administers the Bankruptcy by verifying the accuracy of the filings and taking possession of the debtor’s assets in order to sell them and distribute the funds to the creditors. The Trustee will meet with you at the Meeting of Creditors.
U.S. Trustee: The U.S. Trustee is employed by the Justice Department and ensures that there are no abuses of the Bankruptcy process. They look out for fraud in filings and bad faith use of the Automatic Stay. If the debtors file a well-prepared petition and disclose everything, they will not likely meet the U.S. Trustee.
Bankruptcy Judge: This is a Federal Judge that exclusively hears matters related to Bankruptcy filings. If there is a dispute among creditors or between the debtor and the creditor regarding classification of assets or debts, the application of exemptions or the Automatic Stay, the Bankruptcy Judge will hold a hearing and decide the matter. Once the matter is decided, the Trustee resumes administration.