As we end one of the slowest years for corporate bankruptcy filings, all indicators point to the fact that filings should heat up in 2016. Bankruptcy can be extremely disruptive to clients; however, the following tips may help your clients that could find themselves creditors, or debtors, in the new year.
The Buzz of Burgeoning Bankruptcy Filings
Last week, the Office of the Comptroller of the Currency released its annual survey of bank examiners which reported that bank standards in leading were similar to what the examiners saw in 2008. The drop in standards were most notable in leveraged lending, commercial real estate lending and credit cards lending due to competitive pressures presented in these markets over the past few years.
Why Is This Important?
Any debt that a bankruptcy debtor owes can be affected in a bankruptcy case. Additionally, any property in possession of the debtor but owned by another may be impacted in bankruptcy.
4 Tips for Clients in 2016
- Perfect Your Security Interest and Liens. Take a security interest in property when you lend money and do not forget to perfect the interest and maintain perfection. The failure to perfect your security interest puts your property at risk.
- Get a Judgment and Become Secured. If you are not getting paid, get a judgment even if you continue to provide services or goods to the customer. Judgement liens, mechanics liens, broker liens, etc., can be filed to make the money owed to you a secured debt. Getting a judgment or lien does not prevent a workout, but it ensures that if your payment plan doesn’t workout, you are not left with your entire AR being an unsecured debt because you gave your customer a chance.
- Watch your unpaid AR. Be cognizant of your own lending. If customers are consistently becoming behind on their accounts or asking for more to pay, start asking questions and demand they become current on their account. If a customer requests payment extensions which are not driven from competition, don’t extend payment terms.
- Talk to Bankruptcy Counsel Early On. Timing, for creditors and debtors, is everything in a bankruptcy. The bankruptcy rules have many time-sensitive deadlines that effect what property is part of bankruptcy estate and who gets paid from any property in the estate.