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Overview of collecting via the bankruptcy process

In many cases, a business in the construction industry will face a situation in which a business partner, like a contractor or a developer, winds up in financial trouble and thus is unable to pay its bills.

While this blog has discussed several options a business may have in this sort of situation, those who work in construction in Massachusetts should also be aware that they may, in these circumstances, get formal word that a business or individual which owes them money has filed for bankruptcy protection.

The best thing to do in this sort of situation is to consult with a Massachusetts attorney who has experience handling payment and collection issues related to construction projects. However, there are a couple of basic tips one should keep in mind.

The first is that, upon getting a notice of bankruptcy, a business must make sure that it stops all collection efforts. This is because the so-called automatic stay applies in bankruptcies, meaning that creditors cannot proceed without permission from the bankruptcy court. If they choose to ignore the automatic stay, businesses can face legal consequences.

Moreover, it is important that the business follow the court's instructions when it comes to filing a claim for payment through the bankruptcy case. Important deadlines apply to the filing of claims, and, depending on the nature of the bankruptcy case, a creditor may have, and wish to exercise, other important rights as well. Usually, the court's notice of a bankruptcy filing will summarize these important rights.

It is possible for a business to recover at least some of their money through the bankruptcy process. However, it is important for that business to understand its rights and obligations.

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