Collecting from a business that has filed for bankruptcy

Collecting from a business that has filed for bankruptcy

| Oct 8, 2020 | Collections

Few things are more frustrating than having a business owe you money only for the company to file for bankruptcy. You may have done everything in your power to recover your financials. Unfortunately, bankruptcy protection can limit your options going forward. However, that doesn’t mean you have no recourse.

You will have to file a claim

When a business files for bankruptcy, it’s required to provide a list of its known creditors. Everyone on this list should receive a bankruptcy notification. When you’ve received this notice, you will have to file a proof of claim. This is a written statement accompanied by documentation describing why the business owes you money. There are deadlines for filing a proof of claim. You must act swiftly.

After filing a proof of claim, you may attend the creditor’s meeting. Here, you will have the opportunity to question the debtor, under oath, about their financial affairs.

How are payments determined?

Priority status will be given to specific unsecured claims. There is a different process for secured debts. Priority claims are entitled to be paid ahead of other claims that do not have priority status. You will need to determine whether your claim can be prioritized. If so, it’s vital that you do so. This is especially true if the business doesn’t have enough assets to satisfy all of its creditors.

The discharging of debts

If a business is successful in discharging its debts, you cannot take any further action as a creditor. This includes engaging in any form of communication with the company related to the discharged debt. That is why early legal representation is so important. A skilled professional can help determine your available collections options.