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A meeting of creditors is required by law in bankruptcy cases and debt settlement actions. Creditors review the case and determine if they want to challenge the proposed determination. It can be physical or virtual, and may exclude debt associated with false information. It may also occur in voluntary debt settlement processes.
The meeting of creditors is a mandatory step by law in bankruptcy cases. It can also occur as part of debt settlement actions. The process involves the physical or virtual meeting of all the companies or individuals who have granted credit to the debtor and is intended to provide creditors with the opportunity to protect their interests in the proceeding.
Most government agencies that have jurisdiction over debt relief lawsuits such as bankruptcy require a meeting of creditors to be held prior to a final determination of the case. All creditors are notified prior to the meeting so that they have an opportunity to review the case, review the debtor’s application for liquidation or dismissal, and determine what argument, if any, they wish to present at the meeting. The creditor’s objectives during this investigation phase are to determine whether they have a legal basis on which to challenge the proposed determination and whether it is expedient to do so.
For example, in the United States, debt associated with credit obtained using false information may be excluded from debt relief proceedings. A consumer who got a credit card because he told the credit card company he was employed when he wasn’t would be providing false information. The resulting debt can then be ruled out if you file for bankruptcy and if the credit card company chooses to assert its rights in a meeting of creditors. In some cases, a creditor will choose not to enforce their rights. This usually happens when the cost of necessary legal action is more than the amount of the debt, net of any tax credits the business may take on the loss.
A meeting of creditors may also take place as part of a voluntary debt settlement process. In this case, a person, usually a company specializing in debt settlement, acts as a mediator between the debtor and the creditors. That entity is attempting to reach a settlement agreement with all creditors at the same time. Typically, the debtor has a certain total amount that he can pay, which is less than the total amount of his debt. In this case, your creditors are struggling to get a bigger percentage of that amount.
Depending on the governmental jurisdiction, the meeting of creditors can be a physical event at which a representative of the creditor company must appear, or it can be a virtual event, by which all objections to the proposed settlement or dismissal must reach the court or other mediation body. If it is a physical event, the obligee may appear or may hire a lawyer or other agent to appear on his behalf. If it is a virtual event, all objections must be received in the manner prescribed by the governing body.
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