Final Chapter
Chapter 7, Chapter 11-your customer's gone bankrupt? Here's what to do.
It's the legal notice every business owner dreads: A
customer that owes you money has filed for bankruptcy. Before you
start to panic, here's the lowdown on what to do and what
fallout you can expect:
First, stop all collection activities. "The automatic stay
[essentially a federal injunction that prohibits collection efforts
while the case is pending] descends like an iron curtain and
operates as an absolute bar on further collection activities,"
says David Gamache, an attorney at Newman, Freyman, Klein &
Gamache PC in St. Louis. "If the matter has been placed for
collection, the attorney or agency should be notified immediately
by telephone and with a follow-up copy of the bankruptcy
notice."
Next, read the bankruptcy notice carefully. Gamache advises
taking note of important dates, such as the claims bar date, which
is the deadline by which a proof of claim must be filed for a
creditor to share in any distribution of funds; the date of the
creditors' meeting, which is also called a "341"
meeting; and the deadline for filing a nondischargeability action,
a petition to the court that the debt you are owed not be
discharged in the bankruptcy. Also, note the trustee and the
location of the bankruptcy court.
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"The claims bar date is particularly important, as failure
to file a claim with the appropriate bankruptcy court in a timely
fashion likely eliminates any chance of recovery," Gamache
says. "The name and address of the trustee and of the
bankruptcy court should be on the initial notice. Although the
trustee cannot give legal advice, he or she can in many cases
answer routine questions related to the status of the case, asset
recovery and important deadlines. Claims forms can be obtained from
the court."
If you're unfamiliar with bankruptcy proceedings, Gamache
suggests, consult with a bankruptcy attorney to make sure you fully
understand your options and can decide on the best course of
action. Don't just assume you'll never collect what's
owed you. While that may happen, keep in mind that many companies
emerge from bankruptcy stronger than before and able to pay their
bills, and many companies that are liquidated are able to pay
creditors at least a portion of their debts.
Jacquelyn Lynn left the corporate world more than 13 years
ago and has been writing about business and management from her
home office in Winter Park, Florida, ever since.
Contact Source
Newman, Freyman, Klein & Gamache PC,
(314) 727-0220, DavidGamache@nfk-law.com