Your Money: October
From October 2005
Community Comments
Spark a community dialogue. Be the first to contribute by adding your comments.
Bankruptcy Overhaul
New Laws Help Businesses Get Their Due
By Judie Fertig Panneton
Changes in U.S. bankruptcy laws taking effect this month promise to create a friendlier climate for business owners whose customers file for bankruptcy protection, according to two Sacramento lawyers.
Business owners who have not been paid for goods or services by a company that has filed for bankruptcy can find help in several revised sections of the new federal bankruptcy law. For example, changes to section 546 (c)(1) give businesses about an additional month to recover items they sold without payment. Under the former provision, companies had 10 days to make a written demand to reclaim the items from a business that declared bankruptcy. As of Oct. 17, they will have 45 days.
As an example, Howard Nevins, bankruptcy attorney with Sacramento firm Hefner, Stark, and Marois, notes the case of a Brooklyn, N.Y., company that shipped about $170,000 worth of textiles, including bed sheets and towels, to a buyer in Columbus, Miss. When the seller learned the buyer was in financial trouble, he went to court to try to reclaim his goods. However, according to Nevins, the court ruled against the seller because he did not file the case within the 10-day requirement. The problem centered on determining when the buyer actually received the items. Nevins says the textile company would have had much more success with 45 days to make the claim.
Another plus for business owners is section 503 (b)(9), which prioritizes their claims in court, entitling them to collect funds that are owed by bankrupt customers. Before the changes, if a company shipped goods within 20 days of a customer filing for bankruptcy, it was entitled to a “general claim”. The general designation puts the business on the low end of the collection totem pole. This meant that the company would receive mere pennies on the dollar for what it was owed.
Continued...
The Magazine
Site Links
Prosper Plus +
- Get Prosper Plus to receive e-mail alerts, special event invites, and content that interests you.
Community
- Join the Community and start participating. It's fast. It's easy. It's free.
Advertise on this site! Show your support for the Prosper Network and reach influential thought leaders and web users like yourself. Contact us to find out how.
© 2004-2007 Prosper Media, LLC. All Rights Reserved. Terms of Use | Privacy Policy
The materials on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of Prosper Media, LLC.
Community Comments