Legal Question in Bankruptcy in California

Re: collecting money owed from a company who's filed Chapter 11

Financially, it doesn't make a lot of sense to hire an attorney to pursue this debt in bankruptcy, however, if you want to ensure the best chances of success in collecting it, you should retain counsel. If you chose to pursue it on your own, you need to carefully read the notice you received from the Bankruptcy Court. Generally, there will be instructions for filing what is called a "Proof of Claim." You need to prepare a Proof of Claim form, attach all necessary documents to support your claim (invoices, correspondence, etc...) and file it with the bankruptcy court that is handling the Chapter 11. Depending upon what happens, your claim, as an unsecured claim, could be compromised (discounted), could be settled (paid), or the case may eventually be converted to a Chapter 7 in which you will receive what, if any, liquidation value assigned to general, unsecured creditors. None of this is going to happen any time soon, as the debtor (the company who filed bankruptcy) has an exclusivity period of 18 months during which they can operate as a "Debtor in Possession" without dealing with past obligations. By the end of that 18 months, they must propose a plan of reorganization and have it confirmed by the bankruptcy court. Only after a plan is confirmed are you likely to see any money on the claim.

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