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Creditors: Take action when a debtor faces bankruptcy

On Behalf of | Mar 8, 2022 | Business Debt Collection

As a creditor, the last thing you want to hear is that one of your debtor businesses may be filing for bankruptcy. Realistically, you know that you may not be able to collect as much money as you had hoped, and their actions could limit your recovery significantly. The attorneys at the Law Offices of Alan M. Cohen & Associates LLC know that you must act quickly if you think your debtor will be filing for bankruptcy soon. We have over 45 years of combined legal experience in collection law.

Before the bankruptcy filing

When a customer fails to repay their debts, you may wonder about the extent of their financial troubles.  If you have any reason to believe they are contemplating bankruptcy, you will have many more options for collection if you act before they file. Depending on the situation, you may:

  • File a mechanic’s lien – If you work in construction or home repair and did any work on a piece of real estate, a mechanic’s lien gives you an interest in that property if the homeowner does not pay.
  • Reach and apply attachment – When a third party owes your debtor money, you can reach over your debtor to collect that money from the third party.
  • Asset seizure – If your debtor has major cash flow issues, your best bet may be seizing their assets. Massachusetts law has very specific laws about this that you must follow, however.

These are just a few of the many options you have for debt collection before a bankruptcy filing. Once the debtor files, the rules change significantly.

After the bankruptcy filing

If the individual has already entered into bankruptcy, you must file your proof of claim with the bankruptcy court. This will confirm the amount the debtor owes you with the bankruptcy trustee and put you in line to receive whatever payment the trustee might allow.

You will also want to be part of the process if your debtor files for Chapter 11 bankruptcy and restructures their debt to keep their business operating. You will have a vote in the restructuring plan for the debtor to repay most of their debts within three to five years.

Can you force them to file for bankruptcy?

In some cases, you may initiate something called an involuntary bankruptcy proceeding. You would submit a request to the court to start the bankruptcy process and a judge would need to accept your petition. If they do, then the court may force the debtor to liquidate at least some of their assets in order to repay you for your claim. This type of action is not to be taken lightly, however, and you will need an experienced attorney to help you.

Collecting a debt isn’t always simple, but you deserve to get paid

Collecting a debt can be difficult. That is why the experienced collection attorneys at the Law Offices of Alan M. Cohen & Associates LLC have been helping creditors since 1994. As a creditor, you have a right to be paid for the goods and services you provide, and we are here to help. No matter what financial situation your debtor is in, we will help you collect as much as possible. To get started, call us at 508-763-6604 or send us an email today.