If your business is owed money by a company that has filed for bankruptcy, you may be wondering what to do next. This can be a difficult situation, but there are steps that you can take to protect your interests.
In this blog post, we will discuss what happens when a commercial debtor goes bankrupt and the steps that you can take to get paid.
What happens when a commercial debtor goes bankrupt?
When a commercial debtor goes bankrupt, there are a few different things that can happen. First, the court may appoint a trustee to oversee the bankruptcy case. The trustee will be responsible for managing the debtor’s assets and distributing them to creditors.
Secondly, the court may order the liquidation of the debtor’s assets. This means that the debtor’s property will be sold off in order to raise money to pay back creditors.
Finally, the court may also discharge some or all of the debtor’s debts. This means that the debtor will no longer be legally obligated to repay those debts. Depending on the circumstances of the case, any or all of these outcomes could happen when a commercial debtor goes bankrupt.
Steps that you can take to get paid
If you’re a creditor of a commercial debtor that has gone bankrupt, there are a few steps that you can take to get paid. First, you will need to file a proof of claim with the bankruptcy court. This document indicates that you are owed money by the debtor and establishes your rights as a creditor. Questions you’re likely to encounter on the form include:
- What is the name of your business?
- What is the address?
- What is the contact information for the person who handles accounts receivable?
- How much money is owed to you?
- When was the last time that you were paid?
- Have you provided any goods or services to the debtor in the past six months?
Next, you will need to attend the creditors’ meeting. This is a meeting of all the creditors that have filed a proof of claim. At this meeting, you will have the opportunity to object to any of the debtor’s bankruptcy plans.
If you do not object to the debtor’s bankruptcy plan, you will be paid according to that plan. However, if you do object to the plan, you may need to negotiate with the debtor and/or the trustee.
Depending on the circumstances of your case, you may be able to get paid in full, get paid partially, or get nothing at all. However, by taking these steps, you will improve your chances.
What happens to the company’s assets after it declares bankruptcy?
The bankruptcy trustee will take control of the company’s assets and attempt to sell them off to repay creditors. However, certain types of assets, such as real estate, may be difficult to sell. In these cases, the trustee may have to liquidate the assets through a court-ordered auction.
After the assets are sold and the creditors are paid, the bankruptcy case will be closed. The company will no longer exist and its shareholders will not receive any proceeds from the sale of the assets. However, if there are any leftover assets, they may be distributed to the shareholders.
How to get paid if the company is sold after bankruptcy
If the debtor company is sold after bankruptcy, the new owner may pay you if the sale agreement states that the new owner assumes responsibility for paying the debtor’s debts. If the sale agreement does not state that the new owner assumes responsibility for paying the debtor’s debts, you may file a proof of claim in the bankruptcy case to get paid.
You can also try to negotiate with the new owner to have them pay you, even if the sale agreement does not state that the new owner assumes responsibility for paying the debtor’s debts.
Ideally, you can defray the financial impact of bankruptcy by being on top of your debt recovery game prior to the company filing. That means establishing efficient systems for the invoice, tracking, follow-up, and outreach.
We know this can be challenging when you’re also worried about providing quality goods and services and finding new customers while keeping your old ones happy.
If you are owed money by a company that has filed for bankruptcy, our team of experts at Southwest Recovery Services can help. We have years of experience helping businesses get paid, and we can help you too. Contact us today to learn more about our services.