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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Our customer does not currently owe us money. Last sale was

Customer Question

Our customer does not currently owe us money. Last sale was in December 2010, bill paid in January 2011. But we just found out they filed for bankruptcy ("Debtor in Possession"). Don't they have to include us in their List of Creditors so a Notice of Bankruptcy can be sent to us?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  davidhken replied 5 years ago.
Hi, thank you for asking your question on JustAnswer. The other Experts and I are working on your answer. By the way, it would help us to know:

-If they don't owe you money why would you be considered a creditor and what type of claim would you file? I'm just not certain why you would want a notice of bankruptcy if they don't owe you money? How did you learn of the bankruptcy if you were not sent a notice?
Customer: replied 5 years ago.
From a previous experience, working for a company who filed a Chapter 11, my memory is that we had to include vendors on the List of Creditors, even though they did not owe money, to give all an opportunity to file a claim if they said there was a balance. We had to reconcile those discrepencies. Knowing that our customer has filed bankrupcty changes our attitude about granting terms of net 30 days going forward, when the owner is the one who signed the Terms page. If they filed bankruptcy, perhaps their owner is no longer an equity holder, (as occured with my previous employer.)
Customer: replied 5 years ago.
I am going home for the ngiht. I will check this in the morning. thanks.
Expert:  davidhken replied 5 years ago.
Dear JACUSTOMER - Since you have actual knowledge of the bankruptcy you can make your own decisions as to whether to grant any credit. If this is a ChapterXXXXXwill be monitoring their activities through a trustee so it is unlikely they will be seeking any more credit than the bankruptcy plan will allow. I'm not certain that receiving a notice is crucial to any dealing you may have in the future since you already have knowledge and there is no current debt. Obviously I cannot make your credit decisions for you so you will have to analyze the situation and decide whether you feel that granting further credit is worth the risk. There have been many successful Chapter 11 stories in American industry but obviously there is a problem or this would not have happened in the first place.
Customer: replied 5 years ago.
Thanks, I realize going forward what our risks are. The only question I have is "when a company files for bankruptcy, and they have to provide a list of creditors to the court, do they only have to provide names for which the bankrupt company says there is a balance, or do they have to include vendors with whom they have done business within a certain period of time, and if so, what is that period of time?
Expert:  davidhken replied 5 years ago.

I will have to opt out and open this for another expert who actually specializes in bankruptcy. I have never heard of having to name a creditor that was not a creditor but there may be some exceptions and I do not want to provide the wrong answer.

Customer: replied 5 years ago.
Is someone working on this for me? I haven't received a reply, that I know of. Thank You
Expert:  cfortunato replied 5 years ago.

Hi JACustomer,

Assuming this was a voluntary filing, creditors are - by definition - those parties who have a claim against the Bankruptcy filer when the Bankruptcy is filed. Bankruptcy Stat. 101(10). In general, only creditors belong in the Bankruptcy petition - there is no accounting for vendors who are not owed money when the Bankruptcy is filed - unless those vendors received money within a certain amount of time before the Bankruptcy was filed (because this may constitute a "preference", the payment of which can be reversed).

Accordingly, the debtor is not supposed to include vendors with whom it has done business, but to whom no money is owed - unless that vendor's payment can be deemed to be a "preference", and therefore taken back.

 

I think this is what you wanted to know. If not, please let me know.

Thank you!

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and 2 other Bankruptcy Law Specialists are ready to help you

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