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You just got a notification in the mail or saw in the news that a customer or contractual counterparty of yours has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. What does that mean? What happens to the money they owe you, and when will you get it?
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These are natural questions to ask when you receive an official notification about a bankruptcy. The first thing to understand is that once a counterparty files for Chapter 11, you cannot try to collect money from them—you now have a bankruptcy claim. Bankruptcy claims become part of the restructuring process and are generally not paid until there is a court-approved plan specifying the treatment of different types of claims in the case. As a claim holder, your options generally fall into two categories: waiting for the bankruptcy to play out in court or taking action on behalf of your claim to recover some of the value sooner.

What are my options if I don’t want to wait?

Bankruptcy claims come in many types. Some are paid 0%, and others are paid 100% plus interest. Some cases pay creditors within months, while others take years. There is a market for selling bankruptcy claims for cash, consisting mainly of financial buyers who have experience purchasing these assets and assessing their risks.

Where can I get information?

At the beginning of a case, there is often a lack of information. The business will be primarily concerned with stabilizing their operations, generally not with assessing creditor claims. This often means managing cash flows, terminating unprofitable contracts, formulating a go-forward business plan, and possibly selling the business. Large cases often use a “claims agent” to handle information about the case, including documents filed on the docket and submissions regarding claims.

What should I do?

One of the best things to do at the beginning of the case is to stay informed and collect the information that pertains to your claim. A good list of items to gather includes:

• Your contract with the debtor (if you have one).
• Your outstanding invoices you submitted, but haven’t been paid.
• A list of payments you received from the debtor in the 90 days before the bankruptcy petition.
• Recent correspondence with the debtor, if any.

Organizing this information will help you determine what you are owed. During the case, the debtor will file a list of amounts owed to creditors. If you disagree with the amount, you will need to file what is called a proof of claim. You may also need to file a claim if your claim is contingent or unliquidated. There will be more information regarding this as the case progresses.

X-claim can help

Billions of dollars of claims are created in reorganizations every year. The process is often opaque and confusing to creditors who may have only one bankruptcy claim over their entire business career. Retaining a professional or attorney to manage a claim is often a disproportionate cost for creditors. It also increases short term cash outflows. Selling a claim provides a cash inflow, which derisks a situation which is not a core business risk. Using a marketplace like X-claim helps bring more buyers to your claim and improves the offer for your claim. Visit to register to sell your claim today.

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