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Bankruptcy and unresolved disputes…

If I file for bankruptcy and there is an unresolved dispute over one of the debts who prevails? the debtor or the creditor?

In my case there is a dispute over the amount of money that I owe to a particular lender. I had taken a loan of 10K in May 2006 at an agreed upon interest rate of 16% and another loan of 5K in December 2006 at an interest rate of 21.99%. In February 2007 I had paid the lender 5K , I have the cancelled check to prove it. I noted on the letter accompanying the check that the amount should be used to eliminate the higher interest debt , the lender used it instead to reduce the lower interest debt. The next month my check was sent a week before due date , the lender stated that the check arrived 5 days late and jacked up the interest rate on BOTH loans to 28.99% and assessed a late fee of 300 dollars. So according to that lender I owe him 14K but I have disputed that and state that I owe him only 11K.

Each of us has been threatening to take the other to court over this issue but nobody has. Who resolves that dispute if I declare bankruptcy?

I actually needn’t care about whether this lender gets a higher proportion of my assets but then my sense of fair play prevents me from ignoring this. There are other creditors who have treated me better and I hate to see them getting shafted by this unethical lender.

One Response to “Bankruptcy and unresolved disputes…”

A licensed trustee said...

The trustee handling your bankruptcy is required to assign a value to any claims that are received. (A claim is the technical term for debt).

When you file bankruptcy, you are required to provide your trustee with a list of your creditors, including the amount that each is owed. Your trustee uses this list tonotify the creditors of the bankruptcy and to provide them with the paperwork necessary to submit a claim against your estate.

If you have concerns about a specific creditor’s claim you should let your trustee know about your concerns before you file. At the end of the day, it is up tothe trustee to decide what each claim is worth.

I should wanr you that in most cases, claims from commercial lenders (banks, credit cards companies, finance companies) are accepted at the value submitted.

I agree that the practices you have described are questionable, but I’d be willing to bet if we checked the fine print on your lending agreements, the lender had the right to do what they did with your payment and the interest rates.

Hopefully the other people reading this site will learn from your unfortunate experience and stay away from these predatory lenders. If you apply to a major bank for credit and they reject your application then you probably shouldn’t be trying to borrow…