Technical bankruptcy refers to a situation in which a person lacks assets to pay debts, but has not yet filed for bankruptcy and/or protection from creditors, nor has s/he been declared bankrupt by a bankruptcy court. The “technically bankrupt” person might delay filing for personal reasons, or in the hopes of soon acquiring the means to pay his/her debts. Technical bankruptcy is not about missing a single payment; most likely there are several financial obligations the debtor is not meeting.
Technical bankruptcy is not the same as insolvency. In Arizona, the definition of insolvency includes the situation of a person generally not paying debts as they become due, and having debts that total more than the assets s/he has to pay them. Insolvency is a condition that can lead to bankruptcy, and often precedes a condition of technical bankruptcy.
What rights do lenders/creditors have when such a situation presents itself? They may seek what is called an involuntary bankruptcy. Creditors need to monitor payments and be ready to refer matters to an experienced attorney.
In bankruptcies, secured creditors receive priority and unsecured creditors often do not get paid in full. When a creditor suspects or is informed of a technical bankruptcy situation, perhaps the most important and timely action to take is to seek the advice of a skilled creditors’ rights attorney.
Working with an experienced, knowledgeable Arizona creditor’s attorney can help tremendously when evaluating a bankruptcy filing. If you would like more information about technical bankruptcy, creditors’ rights, or if you need assistance from an attorney, contact Windtberg & Zdancewicz to schedule an initial consultation.
The attorneys at Windtberg & Zdancewicz, PLC, provide clients with experienced legal representation in all collection matters. We are experienced in creditor’s rights including garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.