Your vendor or key customer files for bankruptcy. What do you do?
Here’s what you don’t do: Wait until that moment and send a note to your lawyer, asking them to file a proof of claim. It won’t be worth much.
Unfortunately, for many companies, that’s the only option they have. But it doesn’t have to be that way.
So said Rob Nies and Sam Della Fera, the co-chairs of the Bankruptcy and Creditors’ Rights Group at Chiesa Shahinian & Giantomasi, who will be hosting a webinar on the subject on Oct. 26 (register here).
Nies and Della Fera advise that the time to make the call is when you suspect your vendor or customer is headed for bankruptcy (and there are plenty of warning signs for that).
The pair would then instruct their clients to restructure their agreements before bankruptcy hits — and do it in a way that ensures you get paid first.
It may sound easy and obvious — but not everyone does it.
Nies gave a recent example where their client, who operates warehouses, benefited during the bankruptcy of a retailer. Working with the client, Nies put language in the contract that would allow a court to find that it was an executory contract, and therefore, the warehouser falls into a different category than an unsecured creditor.
The result: The owners of the warehouse were fully reimbursed the millions they were owed, while others received only pennies on the dollar.
Nies and Della Fera will discuss all this and more during a webinar that will show steps companies can take, including:
- Reviewing critical agreements and documents in anticipation of bankruptcy;
- Identifying the telltale signs of a pre-bankruptcy customer or client in distress;
- Taking preemptive actions before a distressed customer files for bankruptcy;
- Maximizing recovery from leases and contracts;
- Pursuing guarantors, letters of credit and third-party fraudsters.
The one thing it won’t do? Tell you what to do after a bankruptcy is declared. By then, it’s often too late.
“Our objective is always to maximize recovery to distinguish the client’s claim from all other unsecured creditors, such that you get paid,” Nies said.
Register for the webinar, which is free, here.
ROI-NJ will serve as the moderator.