Resources

Client Alerts, News Articles, Blog Posts, & Multimedia

Everything you need to know about BMD and the industry.

A Business or Person Who Owes You Money Has Filed for Bankruptcy. Now What?

Client Alert
November 16, 2022

You have received a notice in the mail stating that a business or person who owes you money has filed for bankruptcy. Now what do you do? It is important to act quickly to determine your rights in the bankruptcy process and to protect them. You should review the particulars of the debt owed to you with your attorney, as well as the debtor’s bankruptcy filings.

Here are some of the preliminary issues to consider in order to protect your rights as a creditor.

First, you will want to review the debtor’s bankruptcy petition to see what type of bankruptcy they have filed. The most common types of bankruptcies are:

(1) a Chapter 7 bankruptcy in which the individual or business is liquidating their assets in order to repay a small, if any, percentage of the debts owed to creditors;
(2) a Chapter 11 bankruptcy in which a business is seeking to restructure and to pay creditors some or all of what is owed to them in order to continue to operate; and
(3) a Chapter 13 bankruptcy in which an individual enters into a plan to repay creditors, in full or in part, over a period of three to five years.

The type of bankruptcy filed can greatly impact your rights as a creditor and the amount you can expect to be repaid on the debt owed to you.

Second, you will want to review the debtor’s bankruptcy schedules to see if they have accurately listed your creditor information, including your contact information, the basis for the debt owed to you, the amount of the debt, and whether they have identified you as having a secured or unsecured claim. Secured claims are generally based upon a creditor having an interest in assets of the debtor as collateral for the debt owed to them, such as through a mortgage, lien, or UCC financing statement filing. Secured claims typically receive priority and are paid more through the bankruptcy than unsecured claims that have no collateral securing them.

Third, find out when the first meeting of creditors will be held in the bankruptcy and decide with your attorney whether to attend. The first meeting of creditors is an opportunity for the bankruptcy trustee and creditors to ask the debtor preliminary questions about their assets, employment, and intentions in filing the bankruptcy. As a creditor, you will typically receive a notice of the first meeting of creditors in the mail. However, having your attorney check the online bankruptcy docket for the first meeting of creditors and other deadlines in the case is a good idea.

Fourth, file a proof of claim in the bankruptcy setting forth the total amount you are owed by the debtor, the basis for the debt, and whether it is an unsecured, secured, or priority claim. Priority claims that are paid first in bankruptcy can include, but not be limited to:

(1) child and spousal support obligations;
(2) contributions to employee benefit plans;
(3) wages or commissions earned 180 days before the bankruptcy; or
(4) deposits given to the debtor to secure products, services or housing in the future.

You will also want to attach relevant documents supporting your claim to the proof of claim. The bankruptcy court will set a deadline to file a proof of claim and it is important to meet the deadline so that your bankruptcy claim is not waived.

Fifth, monitor the proposed treatment of your claim in the bankruptcy and any deadlines for objecting to the proposed treatment of the claim. In a Chapter 11 or Chapter 13 bankruptcy, a plan will be provided to creditors, showing the percentages of their claims that are being proposed to be paid, as well as the timeframe for payment. In a Chapter 7 case, the bankruptcy trustee will propose percentages of payment to creditors.

Sixth, consult with your attorney regarding whether you may have grounds to object to the debtor receiving a discharge of the debt owed to you, such as child support and alimony, or debt that was incurred by fraud.

Finally, be aware that if you are continuing to do business with the debtor or have provided goods to the debtor soon before the bankruptcy was filed, you may have additional rights in the bankruptcy that need to be asserted quickly. These can include, but are not limited to, making a reclamation claim to recover possession of goods sold to the debtor; obtaining critical vendor status in the bankruptcy; or filing an administrative claim for expenses incurred during the bankruptcy. Discuss your rights as a creditor in these areas and others with your attorney. 

Partner Matt Duncan is experienced in representing creditors preserving and asserting their rights in bankruptcies and would be happy to speak with you regarding your situation. Please email Matt at mrduncan@bmdllc.com. 

bankruptcybusiness and corporate law
Client Alert

EEOC Provides Updated Guidance Regarding Employer COVID-19 Vaccine Policies

June 3, 2021On May 28, 2021, the U.S. Equal Employment Opportunity Commission updated its guidance regarding employer COVID-19 vaccination policies. The new guidance provides much-needed clarification of expectations for employers seeking to promote workplace safety and prevent the spread of COVID-19, including discussion of mandatory vaccination policies, voluntary vaccination incentives, and accommodation of employees based on disability or sincerely held religious beliefs. The full text of the update is found in Section K of the EEOC’s COVID Q&A document. You can also learn more about these and other developments from BMD's Bryan Meek and Monica Andress through the Employment Law After Hours YouTube channel, available here.Client Alert

What Telemedical Barriers Practices Face and How They Can Manage Them

May 28, 2021The onset of the COVID-19 pandemic has led to many businesses and industries having to rapidly adapt new practices in order to stay profitable, and the healthcare industry is no exception. Although telehealth tools and practices have existed and been used since the Vietnam War, the pandemic has caused many individual healthcare practices to heavily rely on telehealth as a large portion of their service mix in order to continue to provide care for patients. Because of this rapid adoption of telehealth practices in order to combat the restrictions of COVID-19, the telemedicine industry’s revenue has exploded in the last year. Experts predict that telehealth will continue to grow in use beyond the current pandemic, estimating the industry’s worth to be $25 billion by 2025. However, this rapid adoption of telehealth was prompted out of need and has not been without its own barriers that practices now face.Client Alert

Which Entity Should I Form When Starting a New Business?

May 21, 2021As a tax law attorney, friends and acquaintances ask me this question all the time: what type of entity should I form when starting a new business? With many business options available it can be confusing determining which business structure would be appropriate. Below is a general overview of each business structure and the tax responsibilities of each.Client Alert

IMPORTANT UPDATE: IRS Opens Portals for Advanced Child Tax Credit Payments 2021

May 20, 2021The American Rescue Plan Act (the “Act”) expands the Child Tax Credit for tax year 2021. In addition to expanding the Child Tax Credit, the Act provides for advance payments of the 2021 Child Tax Credit. Beginning in July, the IRS will automatically send Advanced Child Tax Credit payments to eligible taxpayers based on their 2020 tax return (or 2019 tax return if the 2020 tax return has not been filed and processed yet). The amount of the advanced payment will be up to $300 each month for each qualifying child under 6 years old at the end of 2021 and $250 each month for each qualifying child between 6 and 17 years old at the end of 2021. For example, if you have 2 qualifying children, one 4 years old and one 8 years old, you may receive up to $550 each month in advance child tax credit payments.Client Alert

Employment Law After Hours: CDC SAYS NO MORE MASKS FOR VACCINATED PEOPLE: What does this mean for employers and employees?

May 17, 2021This morning, ELAH published an emergency episode discussing the questions employers sent us since the CDC’s release of its revised mask guidance late last week. This episode explores questions such as whether an employer can allow vaccinated people to go without masks, while requiring unvaccinated people to wear a mask, whether employers can inspect an employee’s vaccine card, and it discusses the risks of liability an employer faces based on the decisions and policies it makes following the release of this CDC guidance, along with many other questions.
Older posts
Newer posts