5 Key Takeaways from Bradley’s Bankruptcy Basics, Part 1

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We hope that you’re enjoying Bradley’s Bankruptcy Basics. Are there topics you’d like to read more about?

Below are five key takeaways from our first month of Bradley’s Bankruptcy Basics:

  1. The early bird gets the worm. Do your homework upon receiving notice of a bankruptcy filing, and review the account. Initial questions include: Is your debt secured or unsecured? What is the outstanding debt owed? Are there any collection/enforcement activities (i.e., repossession) scheduled? You can use the Bradley Bankruptcy Basics checklists as a starting point. Once you’ve gathered this information, you can better identify your objective in the case and strategize about how to maximize recovery in the case, including whether it’s appropriate to retain counsel.
  2. Calendar deadlines, and check them twice. Too often, bankruptcy notices bounce around within companies before landing in the hands of the right person. Hopefully, no deadlines have passed before that happens. Examples of critical deadlines in bankruptcy cases are the deadline to object to a debtor’s discharge under Section 727 or dischargeability under Section 523 and the deadline to file a proof of claim. Failure to timely file a proof of claim may bar any recovery. To overcome a late filed claim, a creditor typically must prove “excusable neglect” (which is not an unenviable position).
  3. Every chapter is different. This chart provides a high-level overview of similarities and differences between Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases. The processes and timelines of different chapters will impact your strategy to maximize recovery in a particular case.
  4. Do not pass go, do not collect $200 (aka don’t violate the automatic stay). Once you receive a notice of bankruptcy or any other indication that a customer has filed for bankruptcy, you should flag the customer’s account and immediately halt all collection activity. Consider your business when you outline and identify your common collection activities that may violate the automatic stay. For example, if you are a landlord, ensure that you do not proceed with filing (or continuing) an eviction against a tenant who has filed for bankruptcy. You will likely need to seek relief from the automatic stay to file that lawsuit. Failure to do so may subject you to sanctions.
  5. Educate the team. All employees who handle accounts where the customer may file for bankruptcy should understand the special treatment these accounts must receive and the potential consequences of noncompliance. Such training is particularly critical for customer-facing employees. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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