Following the frenzy that ensued the recent Chapter 7 bankruptcy filing of bridal retailer Alfred Angelo, it has become all the more important for consumers to understand how a company’s bankruptcy filing could impact them. In the case of Alfred Angelo, many brides were left unsure of whether they would receive the dresses and accessories they had paid for, or if they were going to be reimbursed.
To help educate consumers and retailers on what to expect after a bankruptcy filing, our West Palm Beach business bankruptcy attorneys are offering some insight.
When a retailer files for Chapter 7 bankruptcy, it must liquidate its assets and use those funds to pay off debts. Those debts are repaid by priority order, with priority claims such as back taxes being satisfied first. If there are funds leftover, they will be divided amongst unsecured creditors, a group which includes customers who are owed money by the business. However, it is not uncommon for funds to be depleted prior to unsecured creditors being repaid. Thus, customers hoping to be reimbursed must typically seek out other options. If one’s payment was made with a credit card, the credit card company should honor a dispute against the charge. However, if it was a cash payment that produced the debt, the customer should file a proof of claim within 90 days after the first meeting of creditors. Unfortunately, there is still no guarantee the debt will be settled.
Unlike with Chapter 7, businesses that file Chapter 11 bankruptcy need not liquidate assets. Instead, these companies remain open and operating while reorganizing to accommodate debt repayment. This means that customers may not be affected at all, as any pre-paid purchases should be honored during the reorganization process. On that note, there is always the chance that the reorganization process may prove to be ineffective, and therefore customers should prepare for the possibility that they might not receive the goods and services they paid for, or even be repaid at all. When this is a concern, it is very important to keep a record of all receipts and consult an attorney if one has questions.
If your company is struggling to stay afloat financially, a free consultation with one of our West Palm Beach business bankruptcy attorneys is the first step to finding a solution. Call our office today to schedule yours, so that we may discuss your unique situation and develop a course of action.