Vendors, contract counterparties, and others doing business with a distressed company are often faced with fluid and rapidly-changing circumstances that may be dramatically impacted by the filing of a bankruptcy case. Understanding the complex rights, responsibilities, and potential risks that are triggered by the filing of a case is essential to determining your best course of action.

Our Wilmington Financial Restructuring + Insolvency attorneys have created a resource to help creditors, vendors, contracting parties, and others to confront the challenges of a commercial bankruptcy case. The Creditor’s Rights Toolkit is a collection of brief introductions to important bankruptcy concepts, as well as practical insights that may help you gain a foothold before, during, and after the filing of a case. These pieces may be viewed in full below or printed from the PDF links to become a quick reference guide.

Looking for more information? Our attorneys produce timely and relevant content on topics in the area of financial restructuring and insolvency.

Before the Chapter 11 Case Is Filed

Dealing With Financially Distressed Contract Parties: Should I Terminate My Contract Before They File for Bankruptcy?

There are advantages and disadvantages to having a contract in effect when bankruptcy is filed. Where a default exists prebankruptcy that would justify a notice of default, unilateral termination, or both, the non-debtor party has options and can evaluate and implement an optimal course of action. Once bankruptcy is filed, those options become more limited, as the automatic stay will prevent the non-debtor from unilaterally terminating the contract, and actions, such as court-approved assumption and/or assignment, may occur without the non-debtor’s consent.

Download the “Dealing With Financially Distressed Contract Parties: Should I Terminate My Contract Before They File for Bankruptcy?” (PDF)

Key Parties in a Chapter 11 Case

What Is a Creditors’ Committee?

Careful consideration should be given to the amount owed to the creditor, how important it is to have an ongoing business partner in the debtor and the anticipated time commitment when determining whether to serve on the creditor’s committee. Even if a creditor decides to serve, the creditors’ committee does not represent the individual interests of any creditor and as such, the creditor should consult its own counsel to address issues unique to it.

Download the “What Is a Creditors’ Committee?” (PDF)

Who Is the Debtor?

The debtor is the entity that files for Chapter 11 bankruptcy and is the central player in a Chapter 11 case. The debtor sets the goal of the Chapter 11 case, such as whether to pursue a sale process, a plan of reorganization, or a plan of liquidation.

Download the “Who Is the Debtor?” (PDF)

Who Is a Secured Creditor and What’s the Difference Between a Secured Creditor and an Unsecured Creditor?

A secured creditor is a creditor whose claim is supported by a security interest in a debtor’s assets. A classic example of a secured creditor is a lender who has a loan agreement with the debtor under which the amount of the loan is secured by a lien on all the debtor’s assets. However, not all secured creditors look the same. Indeed, while many secured creditors are lenders, others can have security interests arising from state law (e.g., a mechanic’s lien) or a judicial lien arising from a judgment against the debtor.

Download the “Who Is a Secured Creditor and What’s the Difference Between a Secured Creditor and an Unsecured Creditor?” (PDF)

Who Is the Claims Agent and What Type of Information Can I Obtain on Their Website?

A claims agent is a third party retained by the debtor to take on certain functions normally performed by the clerk of the bankruptcy court. Claims agents maintain websites for each case in which they are retained, which can easily be found with a basic Google search.

Download the “Who Is the Claims Agent and What Type of Information Can I Obtain on Their Website?” (PDF)