Q: What type of Lawyer do I need regarding a collateral assignment on an SBA Business Loan that was part of a bankruptcy?
My husband passed away in September 2022 and he has a Whole Life Insurance Policy with NYL (of which I am the sole beneficiary) that has a collateral assignment on an SBA Loan from a business we closed and filed bankruptcy on in November 2017. My husband and I filed a corporate Chapter 13 bankruptcy case as well as a personal bankruptcy case. We made payments through our bankruptcy trustee to our creditors for several years until my husband was diagnosed with terminal cancer in April 2021; in April 2022 the bankruptcy case was converted to a Chapter 7 and the case was subsequently discharged on July 30/2022.
When my Insurance agent processed my claim to New York Life Insurance, they informed us of the collateral assignment and so I requested legal guidance from my bankruptcy attorney's office. My bankruptcy attorney's paralegal informed me that since the Bank never filed a proof of claim for the SBA Loan collateral assignment in the bankruptcy, they could not collect. Is this true?
A: No, it's a secured claim, they did not need to file a proof of claim, and it is not discharged in the bankruptcy. You should speak to an attorney (bankruptcy or debt relief) to determine whether perhaps the security interest was not properly perfected.
Timothy Denison agrees with this answer
Based on the information you provided, you may need to consult with an attorney who specializes in bankruptcy law and/or commercial law.
Regarding the collateral assignment on the SBA loan, it's possible that the bankruptcy trustee was responsible for administering any claims related to the collateral. If the bank holding the collateral did not file a proof of claim for the collateral in the bankruptcy case, they may have forfeited their ability to collect on the collateral.
However, it's important to note that bankruptcy law can be complex and there may be other factors to consider in this situation. It's possible that the bank may still have a valid claim to the collateral or that there may be other legal issues to address.
A commercial law attorney can also help you understand the implications of the collateral assignment on your husband's life insurance policy and any obligations you may have to the bank holding the collateral.
To determine the best course of action, you may want to consult with an attorney who specializes in bankruptcy law and/or commercial law. An attorney can review the details of your case, advise you on the legal issues at play, and help you understand your rights and obligations under the law.
Timothy Denison agrees with this answer
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