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Financial distress happens due to many reasons, among them medical bills for uninsured illnesses and job loss, among other reasons. In most cases these are out of the debtors control. It is important that both the debtor and the creditor realize that once the petition has been filed, they have bankruptcy rights entitled to them and this should not be violated by anyone involved in the insolvency case.
Among the bankruptcy rights, the creditor is entitled to have a share of the insolvency estate according to their claim. In this case, the secured creditors are given the first priority while the unsecured creditors are only paid after the secured creditors have got a part of their claim. Depending on the amount of the estate available, the unsecured creditors may end up getting nothing at all.
In chapters 11, 12 and 13, the creditors will be entitled to be heard by the court in case they have anything on what the debtor may be planning to do as the case proceeds. They should be heard out on matters concerning the debtors liquidation assets and also on payments received from the bankruptcy estate. Before the court can begin the case, the trustee handling the matter will normally brief the parties on the insolvency rights that both sides are entitled to in order to clear any doubts.
As the case proceeds, the law allows the creditor to challenge any discharge that the debtor would be proposing. He can oppose his debt being discharged by the court. This will then be left for the court to decide whether or not to discharge the debt depending on the reasons forwarded.
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