We owe a company that filed chapter11

[miketruck]

Im the manager of a business that is barely getting by. We use to deal with a company that has filed chapter 11. Our company owes his company 60k. I simply cannot pay it right now as we are barely getting by as it is. He calls me everyday and tell me that that money has to be to him by December 31st. He has made comments to me that "that is his money personally". What is going to happen if we cannot repay him by that date? Will the bankruptcy court take over collections? Any help would be appreciated. Our business is in Missouri and his is in Kansas.

[cyjeff]

Originally Posted by miketruck

Im the manager of a business that is barely getting by. We use to deal with a company that has filed chapter 11. Our company owes his company 60k. I simply cannot pay it right now as we are barely getting by as it is. He calls me everyday and tell me that that money has to be to him by December 31st. He has made comments to me that "that is his money personally". What is going to happen if we cannot repay him by that date? Will the bankruptcy court take over collections? Any help would be appreciated. Our business is in Missouri and his is in Kansas.

Your debt to him is not influenced by his bankruptcy status save for to whom you write your check.

[Chien]

Your debt to him is not influenced by his bankruptcy status save for to whom you write your check.

I either misread the post or misunderstand the response. Perhaps you should clarify, OP.

If the BK is a Ch. 11, the company can’t be a sole proprietorship. Therefore “he” and the company can’t be synonymous. If you owe money to “him” personally, it’s unaffected by the BK and your preface doesn’t make sense. If your company owes money to the company that’s in BK, that matter is in the trustee’s hands, and yes, the bankruptcy court will take over collections of the petitioner’s accounts receivable.

If your company owes money to the company in BK and you pay him, you’re both going to have issues with the court. They’ll just be different issues. You won’t have satisfied your debt to the petitioner, and he’s going to have to disgorge company assets. If you owe money to the petitioner in bankruptcy, you’re safer dealing with the trustee.

[StephenH]

You should contact an attorney. BK is very complex and there is a lot of complex issues involved here.

[cyjeff]

Please state the statute that allows a person to ignore a debt to a company in bankruptcy.

As far as the OP is concerned, the debt is still owed. What may or may not be done with the monies once paid may be interesting, but it is not going to change the OP's responsibilities and, therefore, his actions.

[Chien]

Please state the statute that allows a person to ignore a debt to a company in bankruptcy.

Is that request directed to my post? I’m unclear. I don’t see the suggestion to “ignore the debt” in my post or any other. Nevertheless, if clarification of my post is required, allow me to try.

1) If the BK is Ch.11, it’s not a personal BK.
2) If a debt is owed to “him” personally, the OP deals with it with “him” and resolves that on his terms or may be sued.
3) If the debt is owed to the petitioner in bankruptcy, it (the petitioner) may have been put into the hands of a receiver or it even could have been left in the hands of the owner(s), but it is under the aegis of the bankruptcy court and the supervision of the management and control is legally the duty and responsibility of the trustee.
4) If the debt is owed to the petitioner in bankruptcy, is it immaterial whether the OP pays “him” or the petitioner? It’s not until the trustee or receiver puts the petitioner’s A/Rs in the hands of a collection attorney to maximize the return for the benefit of creditors and ensure fulfillment of the reorganization plan. Will it make a difference then who was paid? Having been in the position of the attorney, I’d say so. The response can be, “That’s nice, but you didn’t pay the creditor/petitioner, so pay again and go seek indemnification from “him”. Or it can be “That’s nice, but you’ll have to prove that you paid so we can force him to disgorge”. The OP is in federal or state court for some proceeding.

An additional problem creeps in when “he” has skipped (it happens – the reorganization plan wasn’t acceptable and there will be a conversion to Ch 7, or “he” was just dragging out the inevitable or whatever). Then the response will definitely be “That’s nice, but you didn’t pay the creditor/petitioner. Pay now or be sued”. There isn’t concern about successful or unsuccessful efforts at indemnification. The creditors’ interests are the only concern.

That was the reason for suggesting that the OP also clarify and that the OP pay the court/trustee if the debt is owed to the petitioner. If I’m the OP, the entity that I pay is more than “interesting”; it’s practically and strategically important. Beyond that, I know I didn’t suggest ignoring the debt. Sorry. I would have thought that was obvious.

Just as an aside, the OP is going to have more time and flexibility to pay, if the debt is owed to the petitioner (but the explanation for that is a whole separate thread). The reason for mentioning it is that the OP wants flexibility and time.

[creditorRights]

Just because the company you owe money to is in chapter 11 right now, you still owe them the money. He can hire a lawyer to commence legal action against your corp. I do not know much about the debt but if there is anything like personal gaurantees and what not just watch out.