Page 28 - Network Magazine Spring 2019
P. 28

       Getting Paid When the Client Goes Bankrupt: It’s Possible
SCOTT M. WILHELM, ESQ.
WINEGAR, WILHELM, GLYNN & ROEMERSMA, P.C.
Whether you are a small business owner, an entrepreneur or a valued member of a team, no matter your profession or trade, getting paid for your work is the lynchpin of your endeavors. So, when that customer/client for whom you have worked tirelessly for weeks, months or even years does not let- on that he or she is struggling financially, it can be a shock that your first indication of trouble is the notice of bankruptcy that you receive in the mail.
Rather than assume that your labor will bear no fruit, you should make an inquiry further into the particulars of the customer/client’s predicament to determine if you are able to get paid because you may be pleasantly surprised. Not everyone is eligible to file for protection from creditors under the United States Bankruptcy Code. Here are a few things you should look for if you have the unfortunate experience of being listed as a creditor in bankruptcy.
2. Whether the debtor filed bankruptcy previously:
The availability of protection from creditors under the United States Bankruptcy Court is not unlimited. Once you receive notice that your customer/client has filed bankruptcy, you should check the records of the United States Bankruptcy Court to determine if the debtor has filed bankruptcy in the past which may render the person ineligible to be a debtor. While there are some exceptions, generally an individual can only obtain a discharge of debts once every eight years.
3. Exemptions: The United States Bankruptcy Code provides the debtor with “a fresh start” by relieving the individual of his debts. In exchange for relief from his creditors, the debtor must surrender assets which Congress has deemed as unnecessary to “a fresh start.” Accordingly, there are limits on the kinds, and the amounts, of property which an individual can retain in a bankruptcy proceeding. For example, a debtor is permitted to obtain a limited amount of equity in a primary residence and a motor vehicle. Likewise, a debtor can retain some household goods. As a creditor in a bankruptcy proceeding, you should carefully scrutinize the petition to determine whether the debtor possesses non-exempt assets.
1.
The amount of the debtor’s debts: There are limits to the amount of debt that an individual can hold in order to be an eligible debtor. For instance, cur- rently, individuals with unsecured debt in excess of $394,725.00, are generally precluded from filing bank- ruptcy. That is why you should examine the debtor's entire bankruptcy petition. While you will receive only a one-page notice of bankruptcy, you should go to the United States Bankruptcy Court’s website to view the entire bankruptcy petition. If the debtor deb which exceeds the statutory limits, there are steps you can take to object to the petition.
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