This blog has on previous occasions discussed the various means by which businesses in and around White Plains, New York, can collect on accounts receivable that they are owed but which have not been paid.
New York law actually gives creditors a variety of legal collections and judgment enforcement tools by which they can convert what looked like a bad debt in to cash. However, as is the case throughout the country, a debtor facing collections can always resort to what may well be referred to as the nuclear option of filing for bankruptcy under federal law.
When a creditor receives a formal notice that a person who owes the creditor money has filed bankruptcy, then perhaps the most important piece of advice is that they should not take any further collection actions against the debtor without consulting with an attorney. For that matter, it is also a good idea to make sure contact with the creditor is cut off.
This is because in most cases, the debts of someone who filed for bankruptcy are subject to what is called an automatic stay. The automatic stay operates as a federal court order that prevents creditors from taking collection action for so long as a bankruptcy is pending. Violating the automatic stay can lead to serious and costly legal penalties.
There are exceptions to the automatic stay, and a creditor should consult with an attorney about whether it qualifies for one of these exceptions. Sometimes, a creditor will need to file paperwork with the bankruptcy court in order to get relief from the automatic stay.
In other cases, the creditor may be left with having to work through the bankruptcy process in the hope that they will recover some or all of their outstanding debt via that process.