Photo:When travel company Thomas Cook collapsed in September, hundreds of thousands of travelers were left stranded around the world. Many were vacationers. But what about business travelers or vendors on the hook for payments they'd made to the company or with unsecured debts unpaid by the company? Could they seek remedy?
6 Ways to Protect Yourself When Companies Collapse
Bankruptcy is a mystery to most people, especially for those caught up in a customer’s or vendor’s bankruptcy proceeding. A few practices can help protect your interests, minimize fall-out, and possibly recover costs – all without hiring an attorney.
Act fast and file your claim. If a company or its individual owners file for bankruptcy, you must file a claim with bankruptcy court if you hope to make any recovery. It’s easily done online. Consumer creditors with unsecured debt may have a priority in payment up to $1,800 after the secured creditors are paid and before trade creditors. So the faster you file a claim or seek remedy, the greater the likelihood of recovering any money you’ve paid for services as a customer or laid out as a vendor.
Contact your credit card company. If money for travel, lodging, event reservations, the purchase of goods not delivered, or any expense billed by the company was paid for using a credit card, immediately notify the card company seeking reimbursement or a credit. When bridal company Alfred Angelo filed for bankruptcy in 2017, it reportedly was holding dress deposits from 10,000 customers. The vast majority contacted their credit card companies to receive refunds. If you made a cash deposit of up to $1,800, you can file a priority claim in bankruptcy court.
Reclaim your goods. If you as a vendor of goods delivered products on credit to a company that files for bankruptcy within 45 days of delivery, you have 10 days to then file notice of intent to reclaim your goods.
Protect yourself in the future. Many small to medium businesses put down deposits or buy inventory to produce goods or services for larger customers. Using credit cards for those initial outlays protects the expense in the event of a client’s bankruptcy down the road.
Change your payment terms. If working with a company already in bankruptcy reorganization under court supervision, insist on deposits in full for material outlays and COD for final delivery.
Landlords, immediately hire an attorney. If you learn a tenant has filed for bankruptcy, call an attorney with bankruptcy experience. Matters of landlord rights and remedies are complicated and waiting may only hurt your case.
We’ve been conditioned to believe that hiring an attorney is the first step in addressing bankruptcy collections. While not all matters are the same, responding to news of a bankruptcy filing quickly and preventing exposure in the future can improve your chances of collecting what’s yours.
Charles M. Tatelbaum is a Director and Practice Group Chair at Tripp Scott PA practicing creditors’ rights and bankruptcy and general and complex commercial litigation. Learn more at trippscott.com.
Tripp Scott Law Firm
Fort Lauderdale Boca Raton Tallahassee