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- Ten Tips on Deduction Management
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- Ten Rights of Creditors Following a Customer Bankruptcy
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Ten Rights of Creditors Following a Customer Bankruptcy
Following a bankruptcy filing, trade creditors can:
- Place the account on credit hold
- Stop shipments in transit***
- Arrange for the return of merchandise in transit***
- File a reclamation claim for any shipments received by the bankrupt debtor within a specific time frame prior to the bankruptcy filing date
- Refuse to extend credit to the bankrupt debtor
- Ask the Court to appoint a Trustee to run and manage the business if the debtor’s management is incompetent, or is involved in some form of theft or fraud
- Ask to be made a part of the official unsecured creditor’s committee
- Refuse an invitation from the US Trustee to join the official unsecured creditor’s committee
- Petition the Court to convert a reorganization bankruptcy into a liquidation
- Demand immediate payment against any personal guarantee or inter-corporate guarantee that a pre-petition creditor may have on file. The creditor company can also sue the guarantor if necessary to collect against that guarantee
A creditor's right to stop shipments in transit and to refuse to provide goods to a bankrupt debtor is not clear cut. For this reason, creditors should consult with an attorney before doing so, especially if their agreement to deliver goods is memorialized in a contract rather than based on purchase order(s) received from a customer.
© 2010 by Michael C. Dennis. All Rights Reserved. Michael Dennis is an author and consultant and can be reached by email at mcdennis13@yahoo.com