When a customer or business partner goes bankrupt, you as a creditor are left with uncertainty – and perhaps a significant amount outstanding. What happens to your outstanding claims in the event of bankruptcy? And what can you do to try to get something back?

Here we provide you with an overview – and explain how we, as lawyers, can help you through the process.

You can no longer demand payment directly

When a business goes bankrupt, a trustee (usually a lawyer) takes over responsibility for managing the estate. The original debtor loses control of their assets and finances, and all claims must now be directed to the trustee—not the debtor themselves.

This means that, as a creditor, you can no longer send reminders, pursue debt collection or attempt to recover the money yourself. Instead, you must follow the rules in the Bankruptcy Act and report the claim to the trustee.

How to file your claim in bankruptcy

In order to be eligible for payment, you must submit a claim form. This is a formal notification to the trustee in which you state:

• Who you are
• How much you are owed
• What the claim is based on (e.g., invoice or agreement)
• Whether you have security (mortgage, guarantee, etc.)

There is a deadline for registration, and it is important to be careful with the content. Applications that are incorrect or late may be rejected.

Who gets paid first in bankruptcy?

Not all creditors are treated equally. Claims are divided into priority groups:

1. Preferential claims – typically wages and vacation pay
2. General claims – such as invoices from suppliers
3. Subordinated claims – such as interest and internal loans

First, the costs of administering the estate are covered, then the highest priority claims. Most ordinary creditors end up in group 2 – and only receive payment if there are funds left over after the others have been covered.

Do you have collateral? Then you are in a stronger position.

If you have a lien on the debtor's assets, you may be entitled to have your claim in bankruptcy covered directly from the sale of these assets. This puts you in a much better position than unsecured creditors. We are happy to help you assess and enforce such rights.

What can you expect to recover from your outstanding claims in bankruptcy?

Unfortunately, many bankrupt estates provide little or no payment for unsecured claims. It is not uncommon for creditors to have to accept losses – but there are exceptions. If the estate is valuable, or if the debtor has made transfers that can be reclaimed (set-aside), there may be funds to be recovered.

How we can help you

As a law firm, we assist you throughout the entire process:

• We assess your claim and documentation
• We submit the claim in the correct manner
• We follow up on deadlines and contact the trustee
• We assess whether there are grounds for further claims – such as board liability or reversals
• We ensure that you do not miss out on rights that you are actually entitled to

Getting help early on can be crucial—both to increase the chance of covering your outstanding claims in the event of bankruptcy and to avoid mistakes that lead to losses.

Do you have claims in a bankruptcy estate, or are you concerned that a customer may soon go bankrupt?
Contact us today for a no-obligation assessment. The sooner we get involved, the better we can protect your interests.