Creditors: What CFOs and Business Managers Need To Know. Your Company Shipped Goods. Now the Customer Files a Bankruptcy!

You shipped goods to your customer on Monday like you did for years. You sent the invoice by email on the same day. Again, like you did for years. The products arrived at the customer’s warehouse or shop on Tuesday.

On Friday, you received a Notice of Commencement of Bankruptcy Case.

Are you out of luck? Do you risk being last in line to get paid along with many other creditors?

Maybe not!

If the customer received the products you shipped within twenty days of filing a bankruptcy case, then you may be entitled to claim that the value of what goods were shipped in the ordinary course of business within twenty days should get a higher status in the payment ‘food chain’. This means a better chance to get paid once the customer files a bankruptcy reorganization plan.

To get ‘administration claim ‘status you must ask the Bankruptcy Judge to agree that your debt for the value of the goods you shipped are entitled to administrative claim status. Administrative claims get paid ahead of other debts incurred before the bankruptcy case filing or after twenty days from the case filing.

See Bankruptcy Code Section 11 U.S.C. 503(b) (9). Just possibly you are no longer ‘last in line’.