Now What?
Evaluating Your Position Upon a
Counterparty’s Bankruptcy
Brandy A. Sargent
November 9, 2009
Gather Your Information
• Internal Materials:
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Ongoing Contracts
Non-Contract Materials (emails, letters, verbal agreements)
Current Accounts Receivable, Accounts Payable
Recent History (one year’s A/R is very helpful)
Upcoming Events (goods in transit, shipments to be made,
payments due, etc.)
Gather Their Information
• Where is the Bankruptcy Case Pending?
 State, District, Company Name, Case Number
• How can you get the information?
 From the Company
 From a Notice Agent
 From the Court (fee for use service)
• Pay attention to notices you receive!
 They can affect you and your ability to recover
Gather Their Information
• First Day Motions (in larger corporate cases)
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Omnibus Affidavit
Post-Petition Financing, Cash Collateral Use
Goods In Transit/Ordered Pre-Bankruptcy
Lien Claimants
Critical Vendors/503(b)(9) Claims
Customer Programs
Utility Providers
Sale Motions
Stop The Bleeding
(If you Can)
• Automatic Stay
 You must stop activities that seek
to collect funds due, force delivery
of goods, or cancel most
“executory contracts”
• Consider Whether to Stop Selling/Purchasing
 If you sell or buy on a non-contract, open account
basis, you are not required to continue
• Stop Goods in Transit (but don’t resell them yet)
 If you are delivering or using a common carrier
Protect (Enhance?) Your Position
• Critical Vendors
 Watch out for the stick that
comes with the carrot
• 503(b)(9) Claims “20-day
Claims”
 Goods delivered in the ordinary
course within 20 days before
bankruptcy
 Are not required to be paid
immediately
• Reclamation Demands
 Not a violation of the stay
 Subject to prior security interests
 Look back 45 days, must be
asserted within 20 days of
bankruptcy
• Setoff Rights
 Governed by underlying law
 Must seek relief from the
automatic stay
• Liens
 Your ability to assert them postbankruptcy depends on
underlying law
Going Forward
• If you are a party to an on-going “Executory Contract”
 Your obligation to perform generally continues during
bankruptcy
• The Debtor may assume or reject the contract, but does not
have to make the decision immediately
• Sometimes you can request that the Court force the debtor to
make the decision early or provide adequate assurance of
performance
 Watch for assumption, rejection, assignment and cure
notices
 Special rules apply to: real property leases, commodities
contracts, intellectual property agreements
Proof of Claim
• Deadlines will vary depending on the Court and type
of case
• Form and location for filing will vary by Court and
case
• Applies to pre-bankruptcy claims
 Pay special attention to 503(b)(9) claims, “gap” claims,
secured claims
 Does not cover administrative claims or cure claims
• Consider whether there is any reason you do NOT
want to file a claim
Other Events/Considerations
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Creditors’ Committees
Plan Process
Conversion/Dismissal
Claims Objections
Claims Sales
Preference Actions
Doing Business After the Bankruptcy