What Credit Professionals Should Know About Bankruptcy
This week NCS shared an article from CRF News, The Ten Most Important Things That the Collection Professional Absolutely Needs to Know about Bankruptcy, by Robert S. Bernstein, Esq. and Allison L. Carr, Esq. of Bernstein-Burkley, P.C. (the article is on pgs. 30 & 31).
In this article, the authors explain the Chapter 11 process (including the plan and subsequent discharge of the bankruptcy), the role & composition of the Committee of Unsecured Creditors and what may qualify as an Administrative Expense Claim.
What about the Automatic Stay, Claims Process and Preference Actions? Have no fear, the authors addressed these items too!
What is the Automatic Stay? “…invokes a stay on all proceedings against the debtor related to collecting debts or enforcing a claim.” In other words, you are no longer permitted to continue with collection efforts against your customer while the automatic stay is in place.
What Happens During the Claims Process? File your Proof of Claim! “… best practice is for the creditor to then file a Proof of Claim on the debtor’s claims register. A creditor’s claim can be discharged even if the creditor had no notice or knowledge of the bankruptcy case, so therefore it is best to actively pursue the claim and participate in the bankruptcy process.”
Talk to Me about Preference Actions. If you receive a demand to pay back monies paid to you by your customer, the authors recommend you hold off & not make that payment.
“Creditors should never pay when they receive that demand letter; often, creditors have valid defenses to this demand and an attorney can assist in negotiating a settlement for a much lesser value.”
Of course, if your customer has filed for bankruptcy protection, seek legal guidance – don’t try to navigate the law on your own!
Determining your furnishing dates can be more difficult than you think. We are often asked “do I use my ship date or delivery date as my furnishing dates?” and this week we answered that question in our blog post, Should I Use the Ship Date or Delivery Date to Calculate Deadlines.
“Furnishing dates can make or break your rights to file a mechanic’s lien or serve a bond claim. In fact, your first furnishing and last furnishing dates are two of the 5 key pieces of information needed to determine whether you are within your rights to properly secure your claim.
Each state, as with everything else as it pertains to lien rights, has its own definition of what a furnishing date is… we always recommend calculating deadlines conservatively (in most cases it’s better to be a wee bit early than a wee bit late) and using the earlier ship date for furnishing would be more conservative than using the delivery date.”
Even though businesses have stabilized financially, there are still bankruptcy risks out there (e.g. oil & gas industry!). If your customer files bankruptcy, it’s not enough to be a secured creditor, you have to be prepared to closely follow the steps for filing a proof of claim form so you can assert your secured status. Learn more in this week’s infographic: Bankruptcy Proof of Claim – Filing as a Secured Creditor.
Spring is on its way and so are our spring seminars. In April, NCS will be heading to Dallas & Houston – you should join us! Click here for more information
Tune in Feb 23 @ 1:00 pm for An Advanced Look at the Lien and Bond Claim Process as we take an in-depth look at the lien and bond claim process, including the serving of the preliminary notice, filing of the mechanic’s lien and enforcing foreclosure.