What To Do When A Client/Customer Files Bankruptcy
Added on July 9, 2018
Business may be booming for some organizations, yet there will always be companies that are struggling and some end up filing for bankruptcy. Do not be surprised if you receive a letter from an attorney informing you that one of your clients/customers are seeking financial relief in a court of law in order to help resolve their problems. The bankruptcy proceedings may be comprised of rules that both the debtors and creditors are required to follow, however it is still a matter of making a deal that will benefit your interests.
In certain situations you will have a much better chance of receiving the money that is owed to you, or at least a partial portion of the debt. The bottom line is about protecting your bottom line. Here is some advice on what to do when a client/customer that owes you money files for bankruptcy.
Conduct A Cost Benefit Analysis
The first course of action is to determine if it is worth your effort to pursue the debt, continue working with the company, or is it better to simply take the loss and move on? In most cases, smaller companies that file bankruptcy will not be able to reorganize and come out of bankruptcy, nor do they have tangible assets that can be liquidated in order to distribute anything meaningful to the unsecured creditors. Start the cost benefit analysis by reviewing the debtor schedules that are included in every petition. The schedules will provide you with all of the information that pertains to the debtor’s financial position.
File The Proof Of Claim Form
The next step is to review the bankruptcy filing notice in order to see what the deadline is to file a claim with the bankruptcy court. The Proof of Claim how much money you are owed, per the debtors’ records. Be sure to file this form on time or it will completely eliminate any opportunity you may have of getting paid. If the information is not accurate be sure to correct the amount owed before returning the form.
Be present At The Creditors Meeting
The creditors’ meeting is a gathering that consists of the court appointed trustee, the debtor, and the creditors. The debtor is required to explain why they are unable to pay their debts. They must describe why things got so out of control and how they plan to proceed. This is the time for creditors to question the debtor directly. The creditors are allowed to object to the repayment or reorganization plan if they feel that they are not being treated in a fair manner.
Carefully Review The Proposed Repayment Plan
Debtors have up to 120 days to create a reorganization plan. The reorganization plan is sent to each creditor for review once it is deemed to be workable by the trustee. In order for the plan to be approved, the debtor must have consent from over fifty-percent of the total amount of creditors and from over two-thirds of the debt that is owed. Carefully review the discloser documents to see exactly how the debtor plans to pay the creditors. If you are owed a sizable amount of money you should seek the advice of an experience bankruptcy attorney.
Navera Group has twenty years of experience advising middle market and closely held organizations in a variety of business and financial related matters. Our team of experts will work hand in hand with your leadership team to ensure the best overall outcome for your company. If you have any questions, or would like more general information about our array of services, please contact us today. Phone: 617-356-7516; Email: Info@Naveragroup.com; Website: www.NaveraGroup.com