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What Should You Do If People and Businesses That Owe You Money Declare Bankruptcy Because of the COVID-19 Pandemic?


When unemployment claims rise dramatically, bankruptcy filings soon follow.  You probably do not want to think about the possibility of your business filing for bankruptcy, and there is a chance that you will not have to.  Most likely, though, the new wave of bankruptcy filings will be big enough that you will notice it even if your business emerges financially solvent from the coronavirus pandemic shutdown.  The fact that so many individuals and businesses have lost their main sources of income will have long-lasting effects, and you should not assume that, once businesses are allowed to reopen, all the revenue streams of your business will go back to the way they were in early 2020.  If an entity that owes you money files for bankruptcy, you may still be able to collect part of the debt they owe you.  It is a good idea to discuss your emergency financial plans for your business, including the possibility of companies indebted to you filing for bankruptcy with a Maryland business law attorney.

Maryland Bankruptcy Filings in the Age of COVID-19

The courts, like most public and private institutions in Maryland, have greatly scaled back their activities in order to accommodate social distancing.  The temporary procedures for Maryland bankruptcy cases during the COVID-19 pandemic includes some of the following provisions:

  • Chapters 7 and 13 bankruptcy meetings scheduled before the middle of June 2020 will take place by videoconference.
  • Filing deadlines have been extended.
  • In-person hearings have been postponed until at least May 10.
  • The courts will accept written affidavits for some matters which normally require in-person court appearances.

In other words, it is still possible for businesses that cannot pay their debts to file for bankruptcy.

Can You Collect a Debt from a Bankrupt Business?

Of the various types of bankruptcy, none makes the debtor or its assets invisible to creditors.  When a business declares chapter 7 bankruptcy, it is the end of the company’s lifecycle.  It sells its assets for whatever price it can get, and then pays off as much of its debts as it can.  If a business that owes you money, you will be lucky to get a fraction of the debt you are owed.  After that, there is nothing you can due to collect debts from a borrower that no longer exists.

Chapter 11 bankruptcy protection, also known as restructuring, is a type of bankruptcy specific to businesses.  The company can stay in business, and it even gets to keep possession of most of its assets.  In order to be eligible for chapter 11 bankruptcy protection, a business must file a debt repayment plan and abide by its promises to repay creditors.  From a creditor’s perspective, chapter 11 bankruptcy protection means that you will eventually get your money repaid, but it will be in small increments.

Let Us Help You Today

Bankruptcy or not, collecting outstanding debts owed to your business is a major challenge in the COVID-19 pandemic.  A Washington DC small business law attorney can help you strategize to enable your business to survive until brighter days.  Contact Tobin O’Connor Concino P.C. for help today.




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