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Can filing Chapter 11 protect a company from honoring warranty work on their products they sell?
Whiteville, NC
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Posted 7 months ago in Contracts / Agreements
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I recently purchased a new RV in Myrtle Beach SC. I am having a few problems with it that the warranty should cover. I am being told by the service department where I purchased my RV from that the manufacture has filed for chapter 11 and will not honor the warranty work while they are in chapter 11. The service department manager is also telling me that their department can not do the warranty work either because the manufacture has to approve it. I would never have purchased this RV if I had known that I would have this problem. Is this legal for a company to sell an item and then not honor the warranty work that is promised to the customer at the time of purchase? —
Answers (1)
Christopher Donald Johnson
This attorney is licensed in Texas.
Posted 4 months ago.
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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 seeking to reorganize in chapter 11 will seek authority from the court to honor pre-petition warranty claims. The court may grant this authority if it is necessary to protect the value of the debtor or its assets. You should consult with an attorney to see if you need to file a proof of claim and/or determine whether the debtor has sought or obtained authority to honor pre-petition warranty claims. |
