I received notice that a customer who owes me low 5 figures claimed chapter 7. It gave the location of his meeting of creditors. Do I need a lawyer to attend this? Is there any chance I will receive anything? Any advice from lawyers or people who have had any experience with this will be greatly appreciated.
I’ve gone thru this…well to many times and it all depends on what kind of “Creditor” you are, how well you dotted your “I”'s and crossed your “T”'s.
In my case I make things and deliver them to the customer, basically 100% “Unsecured” creditor. I’m considered a “Bottom feeder”. I’ve gone thru this at least 4 times with what for my company would be a significant amount of money and have never seen a dime.
If you are a “Secured” creditor you have a better chance of getting something but it’s usually only “partial” payment.
The last company that went belly up on us went into reorganization, then got a loan, then proceeded to pay their executives 24 million dollars in bonuses for doing such a great job at guiding them thru their bankruptcy…I.E. screwing their vendors out of enough cash to emerge from bankruptcy.
~Matt
Edit to add: Sorry I didn’t offer much hope there. Maybe some attorney type might have a neat way of getting you cash in your situation. They also often have “Settlement” things that are sent out and occasionally you get something from that, but it’s usually pennies on the dollar.
Not a lawyer, but a former business owner who faced this situation a few times. Your chance of receiving any money is related to your creditor class. I seem to recall their were 4-5 classes. Essentially money goes to secured creditors first and what’s leftover may eventually flow to unsecured creditors. Other factors would include the amount of liabilities and assets - and what type of assets.
My company was generally an unsecured creditor and typically received from 0-10 cents on the dollar. I only recall one time where I received full payment and that was a case where the amount was minimal.
In your case, with such a large amount, it may pay to have an attorney. There may be a chance the bankruptcy plan can be negotiated among the various classes of creditors, but that may be a very slim chance.
I received notice that a customer who owes me low 5 figures claimed chapter 7. It gave the location of his meeting of creditors. Do I need a lawyer to attend this? Is there any chance I will receive anything? Any advice from lawyers or people who have had any experience with this will be greatly appreciated.
My sympathies. Back in '05, when the airline I work for went bankrupt, I had to visit many of the vendors who provided us with goods or services and tell them that we wouldn’t be able to pay them outside of what’d be allowed by the bankruptcy court. Some of them were understanding and worked with me to keep some sort of relationship going and others said they wouldn’t be able to deal with us without lawyers and everything else that goes with it.
Each case in a Chapter 7 is a little unique. Do what’s best for you and your business, and try to stay as businesslike and unemotional as you can about the process.
BK
I received notice that a customer who owes me low 5 figures claimed chapter 7.
You are the one who should be getting a bailout.
Funny, bailout for small business. I didn’t realize I had stumbled into the comedy club! Good stuff 
~Matt
OUCH! what did you do for him where he owes you 5 figures? I hope you have some signed documentation on his responsibility.
Yes it is documented. I am a broker and the high leverage left his account in debit.
We had a company go bankrupt on us. About 3 weeks later, they dropped off two 53’ trailers filled with office furniture in our parking lot and said, “here’s your money”.
You may receive something, but it may not be the cash somethings.
I got a machine once that way :-).
Something is better than nothing but I prefer the cash.
~Matt
Financial analyst here… I do workouts, so I’m familiar from the creditors side.
No, you don’t need a lawyer to attend the meeting. You may well want one soon, though.
Depending on when you last received payment from this customer, there may be other issues. Also, depending on what you sold him (goods? or services?) there may be other considerations. Your jurisdiction may be important as well. Whether you will recover anything depends on these factors, as well as what the debtor’s asset situation is and whether there are secured creditors ahead of you. If not, and everyone owed money is unsecured, you will all share in the recovery on a pro rata basis.
By virtue of receiving the notice of the meeting, you know you are in the top 20 creditors by size. A committee of unsecured creditors will be selected, and you may want to be on that committee. The committee gets counsel (this is why you don’t necessarily need your own lawyer for the first meeting… though if you know bankruptcy counsel, by all means get them involved!)