When a company has financial difficulties, it affects the interests of all parties doing business with the company, including vendors, suppliers, lenders, and landlords.

At Janet E. Bostwick, PC, we work closely with companies and individuals who are creditors of financially distressed businesses that have filed or threatened to file bankruptcy. We work on their behalf to cost-effectively maximize their recovery on the debt owed to them.

We also help creditors understand their rights and pursue options regarding ongoing business relationships with companies on the brink of or in bankruptcy. We can help answer questions such as:

  • What happens to a lease when a tenant files for bankruptcy and will rent be paid moving forward?
  • What should a lender with liens on the debtor’s assets do to protect collateral and rights?
  • What are the risks of continuing to do business with the debtor?

Before Bankruptcy

Creditors may have questions and issues to deal with when there is a threat of bankruptcy, but no bankruptcy has been filed. Common questions include:

  • Can goods be shipped to the company?
  • Can payments be accepted? Should the creditor settle for less than what is owed?
  • Is it possible to ask for security for the past due debt? Before making a shipment?
  • What are the risks if the company files for bankruptcy?
  • What are a creditor’s rights regarding future shipments?

We work with creditors to help them understand the risks. We can assist in negotiating out of court settlements, where possible.

Bankruptcy may become a threat when a business or individual has pending litigation against the debtor. In these cases, we work with the business or individual and their litigation counsel to help assess settlement options and to structure any settlement to minimize future risks. We can help determine if it is in the best interest of the business or individual to settle and what will happen to the settlement if the debtor later files for bankruptcy.

During a Bankruptcy

If a bankruptcy is filed, we help creditors to maximize their recovery. We represent creditors and appear on their behalf in court for both Chapter 11 and Chapter 7 bankruptcy cases.

If the case is a chapter 11, the company will continue to do business. As a result, questions may arise about the ongoing business relationships between the company and creditor.

We are mindful that creditors do not want to throw good money after bad. We work with creditors to determine what actions they need to take in bankruptcy court to protect their interests in a cost-effective manner. We help creditors prepare and file proofs of claim, to share in any distribution. We also represent creditors if the company or trustee challenges the claim by filing an objection.

Among the questions we can help answer:

  • Can the supplier continue to do business with the company?
  • Can a creditor change the payment terms for new goods?
  • How can the supplier assure it will get paid for new goods or services provided?
  • If there was pending litigation, should the creditor ask the bankruptcy court permit the litigation to continue in the original court?
  • What happens to the landlord’s lease when a tenant files bankruptcy?
  • Are there steps a lender needs to take to protect its collateral?

Preference or Fraudulent Conveyance Defense

Under the bankruptcy code, a bankruptcy trustee or a Chapter 11 debtor can pursue “preferences,” payments made before the bankruptcy on past due debts to suppliers, lenders or other creditors. A trustee or Chapter 11 debtor can send a demand letter, or can commence a lawsuit in the bankruptcy court to seek the return of the payments. Preference law contains specialized defenses, which can significantly reduce or offset any claims against the creditor.

A business or individual can also be sued by a trustee or Chapter 11 debtor on other grounds, including fraudulent conveyance. As with preferences, there are defenses that may be available, which minimize or offset any claims.

We work with businesses and individuals to represent them in court and defend against such claims. We help them to determine what its defenses are, what the risks of litigation are and whether the case can be more cost effectively settled out of court.