Christopher Donald Johnson's Answers

Re: Selling products/collecting payment from a company that filed Chapter 11

Generally, a chapter 11 debtor has an obligation to pay its post-petition obligations as they come due in the ordinary course of business. If the Debtor fails to pay for post-petition goods or services, the creditor can seek allowance and payment of a chapter 11 administrative expense for the goods provided post-petition. An administrative claim has priority over general unsecured claims. Whether the claim will ultimately be paid will depend on numerous factors in the chapter 11 case.

1 person marked this answer as helpful

Can filing Chapter 11 protect a company from honoring warranty work on their products they sell?

Under the Bankruptcy Code, a claim arising under a warranty that the debtor issued pre-petition, that is before they filed for bankruptcy, is treated like other unsecured creditor claims. Absent a court order, the debtor cannot honor a pre-petition warranty. However, as a pre-petition creditor you may have an unsecured claim against the debtor and if your claim is allowed you would be entitled to share in any distribution, pro rata with other unsecured creditors. In many cases, a debtor...