10 Questions for a Commercial Bankruptcy Creditor

Suppliers and other bankruptcy creditors must resist the tendency to think that they are “along for the ride” in a customer’s bankruptcy. In fact, after a customer files bankruptcy, asking the right questions and getting the right answers before it is too late can make a big difference.

Consider the following 10 questions.  There are many other questions that might be equally important to those below.  We have chosen these questions because we believe they address issues that more often arise.

By clicking on the above question you can access additional materials, where we examine in more detail the question; we provide an explanation as to why we think getting the right answer is important; and we also give some suggestions on where the answers to the questions might be found.

You might think that some of these questions are simplistic.  In some bankruptcies, you might be right.  In others you would be wrong and the error could be very costly.

Look at the first question.  The name of your “customer”.  You might be thinking:  “How can someone misidentify the customer?”  Consider the following:

Now look at your own company’s books and records.  Cross check the “customer’s name” on the following:

  • releases and purchase orders
  • the contract your company signed with the customer signed
  • the customer name on your invoices
  • the name on the bank account from which your company was paid;
  • business name of the location where you shipped goods or provided services (check delivery records)
  • any 1099s issued to your company for the prior year’s payments

If the customer’s name in this material is not consistent, then your company is like many.

So why is it important to correctly identify your customer in bankruptcy?

  • your company must confirm if your “customer” filed or did not file bankruptcy .
  • in a multi-debtor bankruptcy which of the multiple debtors is your “customer” may affect your company’s recovery of pre-petition claims and other bankruptcy creditor rights and obligations.
  • if one of the entities you have identified as being a possible “customer” did not file bankruptcy, you need to be careful not to give up or weaken the argument that the non-bankrupt entity is responsible for paying your company’s invoices,
  • splitting up payments among multiple customers can actually create or enhance defenses to bankruptcy preference claims.

And there are still other reasons to get the name of your customer right from the start.

The educational materials on this web site are intended to give insight into why asking these questions and getting the right answers quickly is important.

Rev. 20090412