If someone has an unpaid debt to your business and files for bankruptcy, it can be challenging to know how to proceed to ensure you obtain as much money as possible on the debt. The best course of action is to consult with a lawyer who understands how business collections work in the bankruptcy process. The following is some brief information about the process. You should consider each of these steps as mandatory. Failing to participate in some of these steps will result in your losing the opportunity to collect money. Even worse, not respecting the first step could also get you fined. If you are represented by an experienced lawyer, each of these steps should be relatively easy.
Stop Collections
Making Collections After Receiving a Bankruptcy Notification Can Cost You Dearly
While ceasing collection efforts may seem counter-intuitive, the court will likely order an automatic stay as soon as the bankruptcy is filed, which requires halting all legal claims and collection attempts. If you violate this order, you could face liability. This also means that if your collections are being handled by another company, you need to inform them to stop all attempts immediately. Don’t worry, though. Just because you cease collections, that doesn’t mean you won’t get money. The next few steps will ensure that you are identified to the court as a legitimate debt holder.
As soon as you are notified that a debtor has started the bankruptcy process, you need to cease all attempts to collect your debt. Any attempt after you are notified will likely result in a fine and your claim being nullified.
Review the Filing
Debtors must list all of their debts and assets in their bankruptcy, which can help you predict your chances of success regarding debt collection. Hopefully, the debt you are owed is listed among the debts of the debtor. If it isn’t, you may need to prove at a hearing that you have a legitimate claim. However, if it is listed, that puts you in a good position. You should also carefully peruse the list of assets that the debtor is claiming. If you know of other assets that weren’t listed in the filing, advise your business dispute lawyer immediately.
Attend the Creditors’ Meeting
You have the opportunity to meet with the debtor and bankruptcy trustee to clarify your unpaid debts and any assets that may be relevant to the satisfaction of your claim. You should ensure that your lawyer is present at this meeting. While the court makes the final decision about how assets are divided up during bankruptcy, the trustee has a lot of say in the results. Convincing the trustee that you have a strong claim is important to getting fairly compensated during these proceedings.
Is your business owed money by an individual or business that has declared bankruptcy? You are legally permitted to recover the money that is owed to you, as long as you take the right steps. Contact Weisblatt Law Firm today at (713) 666-1981 to get a free phone consultation with an experienced bankruptcy collection attorney.
Fighting Preference Claims
In some cases, the Bankruptcy Code allows a debtor to file a preference claim to attempt to retrieve money they have already paid toward their debts. Typically, bankruptcy courts try to ensure that no creditor has an unfair advantage over others. This is why you must stop attempts to collect after you have been notified. If you received a payment on a debt when others did not, the debtor may be able to retrieve the money and add it to their bankruptcy estate. There are specific ways to defend against these claims, however, and an attorney can help you do so. Not all payments are subject to retrieval. Your lawyer will attempt to determine whether any payments you received are safe from this claim and will fight to protect them if possible.
Getting paid by a debtor before they declare bankruptcy isn’t always a good thing, because in some situations the debtor may be able to retrieve those payments. If you have been paid money before bankruptcy, let your lawyer know immediately so they can defend your right to that payment.
File your Proof of Claim
This is the paperwork stating that you would like to seek payment of the debt through bankruptcy and proving that your claim is valid. If your debt is disputed, you may need to attend a hearing in court. Then you will have to wait for payment either through assets and property liquidation in Chapter 7 or a payment plan in Chapter 11.
This is one of the most important ways an experienced attorney can help you. The court requires extensive records from any creditor who is seeking compensation. You will need proof showing that the debtor incurred a debt, when it was incurred, and any evidence of payments made toward that debt. If the debt was incurred a long time ago, you may need years or even decades of records.
Experienced attorneys know how to recover records, even if they have been lost, and they can preserve all important records throughout the bankruptcy process. This will typically be most important if the debtor didn’t list your debt in their initial filing. In that situation, your lawyer will need to prove at a hearing in front of a judge that you are the legitimate owner of a debt.
Contact an Experienced Houston Business to Business Collections Attorney Today
Get Strong Representation Today
If you are owed money by another business, you should not think that collection is impossible if the owners have filed for bankruptcy. With the assistance of a skilled business-to-business collections lawyer, you have a good chance of obtaining at least partial payment for your debts. At the Weisblatt Law Firm, we can help you collect business debts before or during a bankruptcy.
Are you owed money by a business or individual that has declared bankruptcy? You deserve to get as much money for that debt as the law allows. At Weisblatt Law Firm, we help businesses recover the money they are owed. Please call us at (713) 666-1981 to discuss your situation today.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel. Attorney Bio
