When You First Get the Notice
To many a business owner there is nothing more frustrating than opening the morning’s mail to find that one of your best long time customers has filed bankruptcy, owing you a lot of money. Is there no hope for getting paid? Not necessarily. In this series of postings, we will look at various options for the creditor in a bankruptcy case. These are just designed to let you know what remedies might be available to you. Whether you want to pursue them or not will depend on the facts of your individual situation, how much time and money you want to spend, and whether there is money in the estate to pay you.
Look at the Notice and determine what type of bankruptcy was filed. Not all bankruptcies are alike. The filing could be:
- Chapter 7 – a straight liquidation. A trustee is appointed to liquidate any assets and pay creditors according to the priority scheme set forth in the Bankruptcy Code;
- Chapter 11 – a reorganization. The Debtor retains control of assets and generally continues to operate its business while the Debtor puts together a plan of how the Debtor will repay creditors. Chapter 11 debtors can be individuals or they can be major corporations.
- Chapter 12 – a repayment plan for family farmers. Similar to a Chapter 13 case in that a Plan is filed early in the case; limited to family farmers. These aren’t seen much in the Northern District of California and won’t be discussed much in this article;
- Chapter 13 – an individual repayment plan. The Debtor files a plan at or near the time the case is filed outlining what payments the Debtor will make over the next three to five years (not available to corporate debtors).
In an upcoming post, I will address the need to stop collections.