As a creditor, you have the ability to assert certain claims within your customer’s bankruptcy case. One easy way to do that if the case is an asset case is to file a proof of claim. The claim will set forth amounts due from the debtor to you and the grounds from which this amount stem, whether they be a contract, a note or something else. It is important to attach all relevant documentation to your proof of claim to show you are entitled to monies from the debtor. It is also important to ensure that you (or your attorney) watches for any later objection to your claim by the trustee. If there is an objection, it can be negotiated and resolved with the trustee or litigated in the bankruptcy court.
Another way to assert your claim is to file an Application for Allowance of an Administrative Expense. An administrative expense is one that is, among other things, for the “actual, necessary costs and expenses of preserving the estate” (11 U.S.C. §503(b)(1)) and can include wages for services provided to the debtor after the start of the case. It can also include the value of good you supplied and that were received by the debtor in the 20 days before the filing of the case when the goods have been sold by the debtor in the ordinary course of its business. Administrative expenses have a higher priority than a general, unsecured claim and will be paid before those claims in an asset case. Therefore, these claims can be more valuable and worthwhile to pursue if the facts are in your favor and there are assets in the case.
Additionally, you can assert your claim in the bankruptcy by objecting to a plan proposed by the debtor and/or the proposed treatment of your claim. The plan proposed by the debtor must be in the best interest of creditors, meaning it must propose to pay not less than what would be paid if the assets of the debtor were to be liquidated. If the debtor is treating your claim unfairly or not in line with the provisions of the code, you can object to the treatment. Typically, this will lead to a negotiated settlement and revision to the plan, but it could also be litigated in the bankruptcy court if an agreement cannot be reached.
Finally, creditors also have the ability to object to the discharge of their debt where the debtor obtained the property or services fraudulently or by misrepresenting its solvency. If the claim is declared non-dischargeable, then creditors have the ability to collect the debt from the debtor after the bankruptcy. The time period to object to the discharge of a debt is very short, and contacting your attorney immediately is critical if you believe you have this type of a claim.
As you can see, creditors have many rights to exercise within bankruptcy cases. Additionally, there are many nuances within each chapter of the bankruptcy code. However, filing a proof of claim and/or asserting other claims you have within the bankruptcy are important for creditors who wish to recover on their debt. Many of these issues are time-sensitive, so knowing deadlines for asserting your claims or working with an attorney who can properly advise you of these deadlines is extremely important.
