If someone owes you money and has filed bankruptcy, stop trying to collect right now, wait for the court notice, and then decide within a tight window whether to file a proof of claim, challenge the debt as non-dischargeable, or both. Your odds of recovery depend on what kind of bankruptcy was filed, whether your debt is secured or unsecured, and how quickly you act. Most unsecured creditors recover a small fraction of what they’re owed, and many recover nothing. But there are a few things you can do that meaningfully change the outcome, and a few mistakes that will cost you either money or rights you didn’t know you had.
Stop All Collection the Moment You Learn About the Filing
When a bankruptcy petition is filed, a federal court order called the automatic stay takes effect immediately and applies to every creditor, whether or not the court has notified you yet. You cannot call the debtor, send a demand letter, continue a lawsuit, garnish wages, repossess property, or place a lien on anything. Any action to collect a debt that existed before the filing is prohibited.1Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
Violating the stay, even by accident, is costly. A creditor who willfully violates it is liable for the debtor’s actual damages, including attorney’s fees, and in some situations punitive damages on top of that.1Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay An automated collection call that goes out after filing can create real legal exposure. Cancel scheduled calls, pull back any letters that haven’t gone out, and pause any pending lawsuit until you know what kind of case has been filed.
Read the Notice: The Chapter Controls What Happens Next
Within a few weeks of the filing, the court clerk will send you a notice with the debtor’s name, case number, the assigned trustee, the type of bankruptcy, the date of the meeting of creditors, and the deadline for filing a claim. The chapter of the Bankruptcy Code the debtor filed under controls almost everything about your path to recovery.
Chapter 7
In a Chapter 7 case, a court-appointed trustee gathers the debtor’s non-exempt assets, sells them, and distributes the proceeds to creditors under a statutory priority system. The process typically wraps up within a few months.2Office of the Law Revision Counsel. 11 USC Chapter 7 – Liquidation Here is the hard reality: most individual Chapter 7 cases are “no-asset” cases. The debtor has nothing left for distribution after exemptions, the trustee files a report saying so, and unsecured creditors get zero. The court’s notice will usually tell you not to file a claim unless you are later notified that assets have been found.3United States Courts. Chapter 7 – Bankruptcy Basics
Chapter 13
Chapter 13 lets an individual keep their property while repaying creditors through a court-approved plan lasting three to five years. Debtors earning below their state’s median income typically get a three-year plan; those above it are generally required to commit to five.4United States Courts. Chapter 13 – Bankruptcy Basics The debtor pays a trustee, who distributes money to creditors under the plan. Chapter 13 usually gives unsecured creditors a better shot at some recovery than a no-asset Chapter 7, but payments are slow and rarely add up to the full amount owed.
Chapter 11
If a business owes you money and files Chapter 11, the debtor usually keeps operating while proposing a plan that restructures its debts. The court sets its own claim bar date in Chapter 11 cases, which will be stated in your notice.5Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 3003 – Chapter 9 or 11 Filing a Proof of Claim or Equity Interest
File a Proof of Claim Before the Bar Date
A proof of claim is the formal document that tells the court you are owed money, how much, and why. Without one, you are invisible to the distribution process. You file it using Official Form 410, which is standardized across all federal bankruptcy courts.6United States Courts. Proof of Claim
The form asks for the total amount owed as of the filing date, broken down into principal, interest, fees, and other charges. State the basis for the debt (money loaned, goods sold, services provided) and classify the claim as secured or unsecured. Attach whatever proof you have: signed contracts, promissory notes, invoices, account statements, IOUs, text messages confirming the loan, a ledger of payments received. The stronger your paper trail, the less likely the trustee is to object.
The deadline to file, called the bar date, is rigid. Miss it and you forfeit any right to payment. In voluntary Chapter 7 and in Chapter 13 cases, it’s 70 days after the order for relief. In involuntary Chapter 7 cases, it’s 90 days. Government creditors get 180 days. A court can extend the deadline by up to 60 days if you file a motion with a legitimate reason, but don’t count on it.7Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 3002 – Filing Proof of Claim or Interest File early through the court’s electronic filing system, or mail a signed paper copy to the clerk’s office listed on the notice.
One exception: in a no-asset Chapter 7 case, the notice will usually tell you to hold off. If assets turn up later, the court will reopen the window and give you a new deadline.
Where You Stand in Line to Get Paid
Not all creditors are treated equally. Federal law sets a strict payment order, and where your claim sits determines whether you see any money.
Secured creditors come first, up to the value of their collateral. If you hold a mortgage, a lien on a car, or a properly perfected security interest in equipment, you are in a far stronger position than everyone else. In Chapter 7, you typically receive either the collateral itself or the proceeds from its sale. In Chapter 13, the debtor’s plan has to account for your secured claim.
Priority unsecured claims come next, in a specific order:
- Domestic support obligations, meaning child support and alimony.
- Administrative expenses of running the bankruptcy case, including trustee and professional fees.
- Unpaid wages, salaries, and commissions earned within 180 days before filing, up to $17,150 per employee.
- Certain federal, state, and local tax debts.
Those dollar amounts were last adjusted effective April 1, 2025.8Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases Each tier has to be paid in full before the next tier receives anything.9Office of the Law Revision Counsel. 11 USC 507 – Priorities
General unsecured creditors are last. This covers most personal loans, credit card debt, medical bills, and money owed between individuals. Whatever is left after secured and priority claims are paid gets divided pro-rata, so each creditor receives a percentage of their claim proportional to the money available. In many Chapter 7 cases that percentage is zero. In Chapter 13 it’s often pennies on the dollar, spread over years.
If the Debtor Lied to Get the Money, You Have 60 Days
The debtor’s ultimate goal is a discharge, a court order wiping out personal liability for most debts. Some debts, though, can be excluded from discharge if you fight for it, and the deadline is short.
Debts based on fraud, false pretenses, false representations, embezzlement, larceny, or willful and malicious injury can be declared non-dischargeable, but only if you file what’s called an adversary proceeding, essentially a lawsuit inside the bankruptcy case.10Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge If you don’t file, the debt gets discharged along with everything else, even if the debtor got the money through outright deception.
You have to file the complaint no later than 60 days after the first date set for the meeting of creditors.11Office of the Law Revision Counsel. Federal Rules of Bankruptcy Procedure Rule 4007 – Determination of Dischargeability of a Debt The court filing fee for an adversary proceeding is $350.12United States Courts. Bankruptcy Court Miscellaneous Fee Schedule You’ll also need an attorney, and bankruptcy litigators typically charge several hundred dollars per hour. It’s expensive. But if you can prove the debtor lied to obtain money or property from you, the debt survives the bankruptcy and you can pursue collection after the case ends.
This is the deadline creditors miss most often, and it’s the one with the most damaging consequences. If there is any basis to believe you were defrauded, mark the 60-day window on your calendar the day you get the notice, and talk to a bankruptcy attorney right away.
Debts Bankruptcy Won’t Erase Even Without You Doing Anything
Some debts survive automatically, no adversary proceeding required:
- Domestic support obligations. Child support and alimony cannot be discharged.
- Most recent income taxes, employment taxes, and customs duties.
- Government-backed and qualified private student loans, unless the debtor proves that repayment would impose an “undue hardship,” a standard that is difficult to meet but not impossible.10Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
If your debt falls into one of these categories, the bankruptcy doesn’t wipe out the obligation to you, and you can resume collection once the case ends.
If the Debtor Paid You Recently, Brace for a Clawback
Here is something that catches creditors off guard. If the debtor paid you within the 90 days before filing, the trustee can sue to take that payment back. The theory is that paying one creditor shortly before filing gives that creditor an unfair advantage over the others. These are called preference payments, and the trustee recovers them for the benefit of all creditors.13Office of the Law Revision Counsel. 11 USC 547 – Preferences
The lookback extends to a full year if you’re an “insider,” which includes family members, business partners, and corporate officers or directors. A debtor who repaid a relative eleven months before filing can trigger a clawback against that relative.
You have defenses. The common ones are that the payment was a contemporaneous exchange for new value (you delivered goods or services at the same time), that it was made in the ordinary course of business under normal terms, or that you gave the debtor new value after receiving the payment. If a trustee sends you a preference demand letter, take it seriously and talk to a bankruptcy attorney. These suits are real and trustees pursue them.
Show Up at the Meeting of Creditors If You Have Questions
Within a few weeks of filing, the court schedules a meeting of creditors, sometimes called the 341 meeting after the section of the Bankruptcy Code that requires it. The debtor has to attend and answer questions under oath about their assets, liabilities, income, and financial condition. A trustee runs the meeting, and any creditor can attend and ask questions about anything relevant to the case.
This is your one direct opportunity to question the debtor face-to-face. If you think assets are being hidden, property is being undervalued, or the debtor is misrepresenting their finances, this is the time to press. Answers are given under penalty of perjury. You don’t need a lawyer to attend, though one can help you ask sharper questions. The meeting also sets the clock for several important deadlines in the case, including the 60-day window for challenging dischargeability.
Bankruptcy moves on its own timeline whether you participate or not. Creditors who read the notice carefully, meet every deadline, and act on any fraud claim within 60 days give themselves the best chance at whatever recovery is available. Creditors who ignore the notice or assume the debt is simply gone often forfeit rights they didn’t know they had.