Dealing with the news that a customer filed chapter 11 can feel like a sudden financial storm. Accounts receivable departments, credit managers, and finance teams may find themselves navigating an unfamiliar legal landscape—one where standard collection processes pause and payment timelines stretch indefinitely. This guide breaks down the essentials of Chapter 11 for corporate creditors and outlines strategies to protect cash flow and secure bankruptcy liquidity.
Understanding Chapter 11 and Its Impact on Creditors
When a company files for Chapter 11 bankruptcy, it seeks to reorganize its debts under court supervision while continuing operations. For creditors, this means:
• An automatic stay that halts collection efforts.
• The need to file a proof of claim by the court-mandated deadline.
• Uncertainty around payment timelines and potential recovery percentages.
Often, small and mid-sized businesses aren’t familiar with these procedures. The moment your customer filed Chapter 11, your exposure shifted from standard credit risk to participating in a structured legal process. It’s critical to understand your priority in the creditor hierarchy—secured claims, priority unsecured claims, and general unsecured claims—and where your receivable fits.
For more detailed insights into claim filing deadlines and court procedures, explore our resources.
Assessing Your Exposure When a Customer Filed Chapter 11
Once you confirm that a customer filed chapter 11, perform a rapid risk assessment:
1. Quantify Outstanding Receivables: Reconcile open invoices and ensure documentation is accurate.
2. Determine Collateral Status: If you hold a UCC lien or other security, your claim may move to a more favorable position in the distribution.
3. Evaluate Cash Flow Impact: Project worst-case recoveries and identify funding gaps.
4. Review Credit Terms: Consider tightening terms on remaining deliveries or implementing partial prepayment structures.
Understanding these factors helps you decide whether to wait for a court distribution or pursue an alternative: selling your claim to access immediate funds. With a customer filed chapter 11, delays can compound liquidity challenges—making timely action essential.
Strategies for Securing Bankruptcy Liquidity
While some creditors opt to navigate the Chapter 11 process independently, the complexity and timing often favor partnering with a specialist. Key strategies include:
• Claim Sales: Convert your unsecured or undersecured receivables into immediate cash by selling your claim at a negotiated discount.
• Post-Petition Financing: If you have ongoing supply relationships with the debtor, access accounts receivable funding or letters of credit to secure future deliveries.
Each option balances trade-offs between recovery rate and cash timing.
Leveraging CRG Financial for Bankruptcy Claims Liquidity
At CRG Financial, we specialize in helping corporate creditors convert Chapter 11 claims into working capital. When your customer filed chapter 11, our team steps in to:
• Assess Claim Value: We analyze the debtor’s balance sheet, court filings, and historical recovery rates to offer a fair, transparent bid.
• Expedite Sale Process: Our streamlined documentation and funding capabilities ensure you receive cash in days, not months.
• Mitigate Risk: By transferring your claim to us, you can focus on core business operations and not ongoing legal procedures.
Whether you have a singe claim or a large book of receivables, our tailored approach provides the liquidity you need without the uncertainty of waiting for a court distribution.
Contact CRG Financial today to discuss selling your bankruptcy claim.