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Bankruptcy Discharge Cuts Off Rights To Collect
Cathleen Cooper Moran

Q. 

I loaned a friend a large sum of money and it was their intention to pay it back. Then they filed bankruptcy and listed me as a creditor. Do I have any legal recourse to get my money back?

-- Marti

A. 

In a loan situation, the only possible defenses of a creditor who made a loan are to prove, in the bankruptcy court, that the borrower lied to obtain the loan. Otherwise, the borrower's liability for the debt is extinguished when they get the bankruptcy discharge.

If the debt is supported by a perfected lien on the debtor's assets, the lien will survive the bankruptcy and a creditor can resort to the collateral only for payment after the discharge is entered.



-- Cathleen Cooper Moran

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