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Retaining your accounts receivable through bankruptcy

More often than not, the companies that come to see us here at The Law Office of Paul Petrillo hope to continue operating after their cases have been discharged. If this adequately describes your situation, then reorganizing your debts and finances through a Chapter 11 bankruptcy may be your best option. To have a reasonable chance at succeeding post-bankruptcy, you may need to try and maintain as many of your current clients as possible. Your ability to do so will depend largely on your ability to retain your accounts receivable. The question then becomes is that even possible.

With a Chapter 7 bankruptcy, nearly all of your business assets are typically liquidated in order to settle your debts. This will often include your accounts receivable. If your bankruptcy trustee deems them uncollectible, you may still be able to collect the money owed to your company, but your business will likely no longer have the support needed to exist.

A Chapter 11 bankruptcy, on the other hand, allows you to present a reorganization plan as part of your disclosure statement. According to the Chapter 11 guidelines given by the Department of Justice, you are able to make a case to justify your keeping your accounts receivable and prove your ability to collect on them in your reorganization plan. Part of that means disclosing all of your accounts receivable and your debtor’ proposed repayment plans to the court. If the court chooses to accept your plan, then it is presented to your creditors. They will then vote to approve it. If they do, then you can continue to count those accounts among your assets as you continue your operations during your case.

More information on preserving your business through bankruptcy can be found here on our site. 

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Law Office of Paul Petrillo
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