Business owners rely on timely and accurate payments when they’re providing services for others, especially other companies. But when the business that owes money files for bankruptcy, owners may worry about how this could impact their bottom line.
Getting payments from debtors
As the creditor, business owners have certain rights when pursuing a claim to recover monies owed. But how much they get from the bankruptcy can depend on whether they decide to file for Chapter 7 or Chapter 11. Either way, this is what creditors may need to do to get the money they’re owed:
- A proof of claim: No matter what type of bankruptcy the debtor files, courts will often send these claims to all creditors. These claims come with forms that have information about the debtor. Once creditors get these forms, they’ll need to put in their name, address, phone number and the dollar amount they believe they’re owed. Once this form is complete, creditors can take this information to the clerk to get filed in the bankruptcy case.
- A warning: If creditors do not receive a proof of claim within a few weeks, they can file a notice saying they want the request immediately. They can also download a proof of claim form from the U.S. Bankruptcy Court’s website. Creditors will want to submit these forms promptly to the clerk. If they don’t, they could run the risk of having their claim denied.
If creditors don’t have a secured claim against a business, like a lien, the compensation they receive may vary. For instance, if the debtor files for Chapter 7 bankruptcy, the creditor likely won’t receive any payments during the bankruptcy process. However, if the debtor filed for Chapter 11 bankruptcy, they have a better chance of getting at least a fraction of what they’re owed.
Business owners deserve compensation for services they provide
When your business offers a service to someone who can’t pay for it, it can cause significant financial strain on your operation. Depending on the amount of money you’re claiming, an attorney may be your best bet at getting you the payments you deserve.