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Tips for Helping a Client Who is Dealing with Bankruptcy

Here are the steps that you need to take to help a client who is dealing with bankruptcy:

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Bankruptcy can negatively affect your business or company, especially if your client or customer is the one declaring bankruptcy. You need to understand that these negative impacts are likely to affect your business and staff, especially if your client was a major investor in your company. Here are the steps that you need to take to help a client who is dealing with bankruptcy:

1. Proof Your Business From the Risk Of Defaulting

It would be best if you cut off all contacts when your client is in debt on their bank account and has declared bankruptcy. You need to be aware that creditors are banned from communicating with debtors concerning their debt under bankruptcy law. However, you must make a point to get in touch with their attorney or a trustee named by the court to investigate if the sum of money they owe you is registered alongside the bankruptcy appeal.

In case the debt is registered, you are required to have a conversation about the handling of the case. When it happens you find out that you are not registered, you will have to take the next step, which is collection after its prohibition is removed.

2. Undertake a Cost-Benefit Examination

It is vital to analyze to learn the degree of your customer’s resources regarding their responsibilities. By doing this, you will decide whether you want to continue pursuing them on the sum they owe you or if you think it is better to bear the loss.

You can make a point to contact a licensed insolvency trustee to help you administer proposals and bankruptcies. Additionally, you could manage assets held in trust. By acquiring a trustee, they will give debtor advice and details regarding the bankruptcy and proposal processes and ensure that the creditor’s and debtor’s rights are followed and respected.

3. Be Aware of the Form of Bankruptcy

You need to carefully examine and have a clear understanding of the nature of bankruptcy. Different types of bankruptcies will help you make corrections on calculations. For instance:

Chapter 7 states that the business or company will be liquidated, explaining that the proceeds or benefits will be dispersed to the respective creditors at stake. You need to know that there is a system designed for the order of payments. Therefore, this means that the secured creditors will be given top priority. On the other hand, if you are an unsecured creditor, it is possible not to receive any payment.

In Chapter 13, the debtor acquires a court-approved proposal to repay all or majority of the creditors at stake over time.

As for Chapter 11, what takes place is a reorganization. The latter means that your business or company may have to wait for a longer time than expected but will eventually get paid.

4. File a proof of claim

You should avoid procrastination and file for proof of claim before the time limit listed on the respective bankruptcy appeal. Therefore, you will be in a position to claim what the debtor legally owes you, and that is why you need to file for the claim immediately after bankruptcy has been declared.

5. Attend the 341 Creditors Assembly

The 341 creditors conference assembles the creditors, the debtor and the trustee. You will not only hear about the debtor’s repayment strategy, but also you can speak up and voice all your concerns. Hence, you will have the platform to express yourself and your views and concerns regarding the matter at stake. Therefore, this will help you when it comes to decision making on what you think will benefit you in the long-run.ss

6. Review the Proposed Repayment Plan

After the trustee appointed by the court has approved the debtor’s repayment plan, you will receive copies for you to comment on. The detailed repayment plan contains information on how the debtor’s strategy to repay you. Additionally, the creditors who have a more significant portion of the debt will have a bigger vote count, which will require a proportion of the borrowers to vote for agreeing on the deal.

Conclusion

The following pointers will help you know how to assist your client in dealing with bankruptcy. Therefore, you will have saved them from making the wrong decisions which would have brought significant challenges.

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