What to do if I just found out that a company that we do a lot of subcontracting for has filed Chapter 11 and they currently owe us $40,000?

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What to do if I just found out that a company that we do a lot of subcontracting for has filed Chapter 11 and they currently owe us $40,000?

Do they still have to pay us even if they file Chapter 11?

Asked on January 21, 2013 under Bankruptcy Law, Wisconsin

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Unfortunately, the money they owe you is almost certainly a general unesecured debt; unsecured debts may be discharged in bankruptcy. While there is a reasonable chance that the chapter 11 plan will see you receive something--maybe pennies or nickles, or if  you're really lucky, dimes on the dollar--it is highly likely that the amount they owe you will at least be reduced in bankruptcy, and could potentially be wiped out entirely. Work done as a subcontractor is not entitled to any protection or preference in bankruptcy.


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