When your Customer Files for Bankruptcy

Author: Michael P. Risko
Date: 04/20/2009

In the current economy, more and more clients of our firm are encountering customers who are filing bankruptcy. There may be ways to recoup a portion, if not all, of the goods supplied to the bankrupt customer or the balance owed by that customer.
A supplier who has delivered goods to the bankrupt customer during the 45 days prior to the customer’s filing of the bankruptcy may be able to recover those goods through a “reclamation” claim. The customer must have been insolvent when the goods were delivered to the customer.
The supplier may also be entitled to an “administrative priority claim” for the value of any goods received by the bankrupt customer within 20 days prior to the bankruptcy filing if the goods were sold in the ordinary course of the customer’s business. There are strict filing and notification guidelines provided by the Federal Bankruptcy Code under each of these options.
If your company has recently supplied goods to a customer who has filed bankruptcy and you have questions regarding your entitlement to a reclamation or administrative claim, please contact us for additional information regarding the likelihood of recovery and to ensure protection of your claims.