The Effects of a Creditor's Non-Participation in Bankruptcy Proceedings

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The Effects of a Creditor’s Non-Participation in Bankruptcy Proceedings

The Effects of a Creditor’s Non-Participation in Bankruptcy Proceedings

Lexology-

It’s essential for secured creditors, particularly those who deal with consumer debts, to have policies in place that address the effects of a borrower’s bankruptcy. A Texas bankruptcy court underscored this need by ruling that a secured creditor’s claim could be modified, lessening its total recovery from the bankruptcy estate, where the creditor did not participate in the borrower’s bankruptcy proceedings despite being notified.

In a recent Chapter 13 case, the court granted a discharge where the debtors’ plan modified and paid off a mortgage, over the creditor’s objection that it could not be bound by the confirmed plan because it had not participated in the plan confirmation process. Finding that the creditor had received constitutionally sufficient notice of its claim treatment, the court held that the creditor was bound to the terms of the confirmed plan and therefore barred by the res judicata doctrine from relitigating its claim value.

[LEXOLOGY]

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One Response to “The Effects of a Creditor’s Non-Participation in Bankruptcy Proceedings”

  1. Lazarus says:

    Bankruptcy rules are unique!!

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