You need to flush them out and get them in line before the case is filed.
I had a close call, or rather my client had a close call, this week when some new information just slipped out.
Thankfully, it was prepetition.
The client, a very bright entrepreneur, thought that the wrongful death suit pending against him could not be included in his bankruptcy until a judgment was rendered. And he was pushing to file immediately!
BINGO, we had the name of another creditor for the filing.
Now, I ask you, how could he have neglected to mention a wrongful death complaint, even if his involvement was as the employer of the accused driver? That has to be another story.
But further discussion brought out the fact that he had some further, related exposure to the customers of his business.
The homeowners on whose job the driver was working were the beneficiaries of an indemnity clause in the contract between client’s business and the homeowners. More BINGO’s.
Narrow focus or bad assumptions on the part of the client, one or the other just about torpedoed this case.
Another instance of entrepreneurial myopia stands out among my war stories.
Client had run several, big dollar businesses, now closed.
Highly anxious to file, and brings me a list of four credit cards as the sum total of his debts.
It doesn’t seem to add up. I ask, is this all? Anyone else? Are you sure?
He kept denying that there was anyone else who needed to be included in the schedules. I kept prodding and he was starting to get testy.
Finally, at wits end, I asked him if there was anyone out there in his business past who wanted to sue him?
Sure, he admitted, and reeled off six more names of former partners, investors, and other unhappy associates.
Add to your patter
Whether you flush out these creditors by interview, document review, or questionnaire, you need to find the creditors beyond the ones who send monthly bills to the debtor.
In your cross hairs should be
- Potential liabilities not yet the subject of suit
- Indemnity agreements
- Unhappy customers
- Disgruntled partners, employees, or investors
Can you add to this list of less than obvious creditors for a business bankruptcy?