Effective Post-Bankruptcy Dismissal Collections Start Immediately

In a tweet yesterday, I discussed a savvy move by a judgment creditor: as soon as a Chapter 13 Bankruptcy gets dismissed, issue a garnishment to the Chapter 13 Trustee for any funds held by the Trustee.

What a smart move by the creditor. While the author of the article calls it a “horrible result,” I’d point out that Debtors’ attorneys do something similar all the time: when a case gets dismissed, they immediately ask that the Trustee release funds on hand for payment to them for their legal fees.

Like I’ve said before, a bankruptcy dismissal is a good thing for a creditor, and, when the case is dismissed, a creditor who takes quick action will generally be rewarded. It doesn’t have to be as bold as a garnishment to the Chapter 13 Trustee–it can be as simple as being the first creditor to file a lawsuit, the first to file a judgment lien, or the first to levy a bank account (and you know where they work and bank…just check the Bankruptcy Schedules).

The key word? Be the “first” to take aggressive action.