Someone Who Owes Me Money Filed for Bankruptcy

By Jamie L. Harris

Creditors who receive a notice from a debtor in a Chapter 11 bankruptcy case may find the Chapter 11 bankruptcy process overwhelming and confusing.  If someone owes you money that makes you a creditor, and them a debtor.  As a creditor, it is critical to understand your rights in a Chapter 11 case.  I would ask these 9 questions if someone who owes me money files for bankruptcy. Here are a few key areas and questions to examine:

Reclamation Rights: Did you provide goods to the debtor within 45 days of the petition date?

Unsecured Creditor Committee:  Are you one of the largest holders of an unsecured claim?

Appointment of a Trustee:  Is the debtor engaging in gross mismanagement or depleting estate assets?

Monthly Financial Reports:  Is the debtor losing money every month?  Is a plan really feasible?

Liquidation Value:    Does the debtor’s plan propose to pay creditors more than they would receive in a hypothetical Chapter 7 proceeding?

Proof of Claim:   Have you received notice of a deadline to file a proof of claim?

Administrative Claim:  Have you provided goods or services to the debtor postpetition which remain unpaid?

Lease Assumption:   Has the debtor filed a motion to assume or reject your lease?  Does is state the correct cure amount?  Have you calculated damages for a rejection claim?

The Plan:  Do you have a basis to object to the debtor’s plan to obtain more favorable treatment under the plan?  Is the plan preferable to dismissal or conversion of the case to Chapter 7?  Are you voting for or against the plan?  Are there any plan deadlines that affect your claim?

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