When Your Customer Files Chapter 11
Originally published: July 2013
A Seven-Point Checklist to Help Protect Your Rights
You’ve been informed by your customer, who has past due accounts with you, that he has filed a Chapter 11 bankruptcy. What do you do now?
- Check to see if you have received the Bankruptcy Court Notice to Creditors. If you have not received the Notice, immediately contact the debtor and ask him for the bankruptcy case number and the court in which the bankruptcy was filed.
- With this information in hand, call the clerk of the appropriate court and confirm that a filing has actually taken place. Confirm it was a Chapter 11 and ask when the bar date is for filing a proof of claim. Also ask if your company is on the list of creditors filed with the Court and request a copy of the Notice to Creditors.
- The Notice to Creditors provides the specifics of the filing including the debtor’s Schedule of Assets and Liabilities. Carefully review the information on the Schedule to determine that outstanding debts owed to you are included, listed correctly and not marked “disputed, unliquidated or contingent”. Unliquidated claims are those for which a specific value has not been determined. Contingent claims are those that may only be owed by the debtor under certain circumstances. For example, where the debtor is a cosigner on another person’s loan and that person fails to pay.
- If your claim is not listed on the Notice to Creditors, is listed incorrectly, or is designated as disputed, unliquidated or contingent, file a Proof of Claim (PoF) with the Bankruptcy Court before the bar date. If you don’t file a timely proof of claim, the court will consider the debtor’s Schedule of Liabilities accurate and make any distributions accordingly.