Acquiring Assets from Bankruptcy Estates and Distressed Borrowers

What does acquiring assets from bankruptcy estates and distressed borrowers encompass?

In Florida, acquiring assets from bankruptcy estates and distressed borrowers involves creditors taking legal steps to reclaim their debts from insolvent entities or individuals. Creditors usually initiate this process by filing a proof of claim with the bankruptcy court, asserting their right to collect on the debtor’s assets.

For example, a Florida bank may acquire a debtor’s real estate after initiating a foreclosure process to recoup a mortgage loan. However, the bank must follow Florida’s foreclosure laws and adhere to the protections provided by the FCCPA and FDCPA to ensure a lawful acquisition of the debtor’s property.

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Which Florida laws and regulations apply to acquiring assets from bankruptcy estates and distressed borrowers?

Federal and state laws govern acquiring assets from bankruptcy estates and distressed borrowers in Florida. The Bankruptcy Code presides over bankruptcy proceedings at the federal level, while the FDCPA regulates debt collection practices.

Florida laws relevant to acquiring assets from bankruptcy estates and distressed borrowers include the Florida Consumer Collection Practices Act (FCCPA), which regulates debt collection practices in the state. Additionally, Florida’s foreclosure laws, including Florida Statutes §§ 702.01-702.11, govern the process of acquiring real property through foreclosure. Therefore, creditors must comply with federal and state regulations when pursuing the recovery of assets from bankruptcy estates and distressed borrowers in Florida.

How does acquiring assets from bankruptcy estates and distressed borrowers connect to the bankruptcy process?

Acquiring assets from bankruptcy estates and distressed borrowers is an essential aspect of bankruptcy legal services for creditors in Florida. The process allows creditors to recover debts from insolvent entities or individuals. Under the Bankruptcy Code, creditors file a proof of claim with the bankruptcy court, asserting their right to collect on the debtor’s assets. The debtor’s assets are then liquidated or reorganized, depending on the type of bankruptcy filed, such as Chapter 7, Chapter 11, or Chapter 13.

When a set of facts is appropriate for bankruptcy services, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation or another form of specialized bankruptcy advocacy, please contact our office to set up your initial consultation.

What legal risks do creditors face when acquiring assets from bankruptcy estates and distressed borrowers?

Consider the following forms of exposure:

• Violating the automatic stay: Under the Bankruptcy Code § 362, creditors are prohibited from pursuing collection efforts once the debtor files for bankruptcy. Violating the automatic stay can result in penalties and sanctions.
• Preference claims: The bankruptcy trustee may seek to recover payments made to creditors within a specific period before the bankruptcy filing, known as preference payments, per Bankruptcy Code § 547. Creditors may be required to return these payments to the bankruptcy estate.
• FCCPA and FDCPA violations: Failure to comply with the FCCPA and FDCPA can lead to legal actions, damages, and penalties. Creditors must adhere to debt collection laws to avoid liability.
• Improper foreclosure: Creditors in Florida must follow the state’s foreclosure laws, including Florida Statutes §§ 702.01-702.11. Errors in the foreclosure process, such as failing to provide proper notice or violating due process rights, can lead to legal challenges and delays.
• Fraudulent transfer claims: If a creditor receives a transfer from a debtor that the bankruptcy court later deems fraudulent, the creditor may need to return the transferred assets to the bankruptcy estate, per Bankruptcy Code § 548.
• Bankruptcy discharge violations: Attempting to collect a debt discharged in bankruptcy can lead to legal consequences, as the debt is no longer legally enforceable. Creditors must respect the discharge order to avoid penalties.

Please contact our office to set up your initial consultation to see what forms of legal protection and advocacy may be available for your unique situation.

How should bankruptcy counsel facilitate acquiring assets from bankruptcy estates and distressed borrowers?

Counsel should consider the following to protect their clients:

• Monitor automatic stay: Proactively monitor the status of automatic stay orders to prevent inadvertent violations. Cease collection efforts immediately upon receiving notification of a debtor’s bankruptcy filing.
• Perform due diligence: Thoroughly investigate the debtor’s financial condition and the nature of the assets sought to avoid fraudulent transfer claims and minimize the risk of preference claim clawbacks.
• Ensure compliance with FCCPA and FDCPA: Train staff on federal and Florida debt collection laws to avoid engaging in prohibited practices and establish internal policies and procedures to ensure compliance.
• Verify discharge status: Confirm the discharge status of debts before pursuing collection efforts to avoid violating bankruptcy discharge orders.
• Follow proper foreclosure procedures: Adhere to Florida’s foreclosure laws and ensure the satisfaction of proper documentation, notice, and due process requirements to minimize the risk of legal challenges.
• Collaborate with other creditors and the trustee: Coordinate efforts with the bankruptcy trustee to maximize recovery while minimizing litigation risks.

Frequently Asked Questions

1. Can a creditor continue to collect from a debtor’s co-signer after the debtor has filed for bankruptcy?

Yes, suppose the co-signer has not filed for bankruptcy themselves. In that case, creditors can still pursue collection efforts against the co-signer, as the debtor’s bankruptcy filing does not relieve co-signers of their liability.

2. How does a creditor know when a debtor has filed for bankruptcy?

Creditors are typically notified by the bankruptcy court when a debtor files for bankruptcy. They receive a Notice of Commencement of the bankruptcy case, which provides essential information about the case and deadlines for filing claims.

3. Can a creditor object to a debtor’s bankruptcy discharge?

Yes, creditors can object to a debtor’s discharge in certain circumstances, such as fraud, concealment of assets, or failure to complete the required financial management course. However, they must file a timely complaint with the bankruptcy court outlining their objections and the grounds for the objection.

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Crucially, this overview of acquiring assets from bankruptcy estates and distressed borrowers does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.