Perspectives

Bankruptcy

Chapter 7 Bankruptcy: A Credit Manager’s To-Do-List

 

When a customer files for Chapter 7 bankruptcy, it’s crucial to act swiftly and strategically to protect your company’s financial interests. Below is a practical to-do list for credit managers and finance professionals navigating this complex process.

  • Confirm the filing

Verify the bankruptcy filing by obtaining the case number and confirming the court’s jurisdiction.

  • Comply with the Automatic Stay

Cease all collection activities immediately to avoid potential penalties for violating the automatic stay.

  • Obtain the Petition and Mailing Matrix

Review the bankruptcy petition and mailing matrix to ensure your debt is listed correctly Confirm your company’s mailing address to receive important notices.

  • File a Proof of Claim

Submit a timely proof of claim to establish your right to receive any distributions from the debtor’s estate.

  • Review Recent Transactions

Examine transactions within the last 90 days for potential preferential payments that may be subject to crawlback.

  • Evaluate Fraud Concerns

If you suspect fraud, consider pursuing and adversary proceeding to challenge the discharge of the debt.

  • Confirm Lien and Bond Rights

Ensure your lien or bond rights are presereved. These rights may offer additionaly protections, even during bankruptcy.

Take Action Today

Navigating a customer’s bankruptcy requires attention to detail and expert legal guidance. Wagner, Falconer & Judd specializes in protecting creidtor’s rights. Contact us to ensure your business is positioned for the best possible outcome in Chapter 7 cases.

Chapter 11 Bankruptcy: Small Business Reorganization Act – A Welcome Relief to Small Business Owners.

Small businesses are a pillar of the American economy. In 2005, Congress enacted Bankruptcy Abuse Prevention and Consumer Protection Act to allow small business owners easier options for reorganization.

After almost 15 years, Congress realized small business debtors were the least likely to have a successful reorganization while still having a high number of small business failures.

On August 23, 2019, Congress passed the Small Business Reorganization Act (SBRA). The SBRA is a Chapter 11 reorganization bankruptcy under the new subchapter, Subchapter V.

The SBRA has new requirements as to which individuals or entities will qualify under Subchapter V, as well as new procedures. These features were added to allow small business to avoid some of the burdensome costs and time typically associated with a Chapter 11 bankruptcy.

The highlights of the SBRA are as follows:

  1. Debt limit has a baseline of total debt at $2,725,625;
  2. Elimination of the absolute-priority rule for creditors;
  3. Appointment of a trustee, similar to those appointed in Chapter 12 and Chapter 13 of the Bankruptcy Code; and
  4. Less strenuous disclosure statements and more debtor-friendly rules governing the plan requirements.

The complexity of filing bankruptcy for small businesses owners and small business debtors may be lessened by these new changes, the option to file under Subchapter V will keep many businesses operating.

The changes brought forth by the SBRA are exciting and a welcoming change to the law. There are many factors for small business owners to consider before filing of a reorganization bankruptcy. As always, it is best to consult with your LegalShield provider firm for a more detailed analysis.

Posted on April 14, 2020