Your customer filed bankruptcy: what to do as a creditor

Updated 2026-10-24

When a customer files bankruptcy, stop all collection activity immediately because the automatic stay under 11 U.S.C. §362 prohibits it. Confirm the case in PACER, note the chapter and deadlines, calculate exactly what you are owed, and file a proof of claim before the bar date. If you shipped goods in the 20 days before the filing, you may have a priority claim under §503(b)(9). Pursue any personal guarantors separately, and get counsel for preference demands.

Step 1: Stop collecting, right away

The moment a bankruptcy petition is filed, the automatic stay in 11 U.S.C. §362 takes effect. It generally bars creditors from calling or writing to demand payment, filing or continuing lawsuits, enforcing judgments, repossessing collateral or setting off debts against the debtor without court permission. It applies whether or not you have received formal notice, and a creditor that knowingly violates it can face sanctions.

Tell your sales, credit and accounts receivable teams, and any collection agency or attorney working the account, to stop. Put the account on hold in your system so automated reminders and dunning emails do not go out.

Step 2: Confirm the case and the chapter

Look the case up in PACER, the federal courts' electronic records system, using the debtor's legal name. Note the court, case number, filing date and chapter. Chapter 7 is a liquidation: a trustee sells assets and distributes proceeds. Chapter 11 is a reorganization: the business usually keeps operating and proposes a plan, and Subchapter V is a streamlined version for smaller businesses. The chapter shapes what you can expect and what deadlines apply.

Read the notice of the case and the debtor's schedules when they are filed. Check whether your company is listed, at what amount, and whether the debt is marked as disputed, contingent or unliquidated.

Step 3: File a proof of claim before the deadline

A proof of claim is the official form a creditor files to state what it is owed. The court sets the deadline, often called the bar date, and it is shown on the case notice or a separate order. Missing it can mean you receive nothing, even if the estate has money to distribute. In some Chapter 11 cases a creditor listed as undisputed in the schedules is treated as having a claim without filing, but relying on that is risky; filing your own claim is the safer course.

Calculate the claim as of the filing date. Include unpaid invoices and any interest or fees your contract allows, and attach supporting documents such as the contract, invoices, statements and any security agreement or UCC filing if you claim a secured position.

Step 4: Check for priority and goods-related rights

• Section 503(b)(9): the value of goods the debtor received within 20 days before the filing, sold in the ordinary course of business, can qualify as an administrative expense claim, which is paid ahead of general unsecured claims
• Reclamation under §546(c): a seller of goods may have a right to demand return of goods received while the debtor was insolvent, but the written demand deadlines are short and strict
• Secured status: if you hold a perfected security interest, your claim may be secured by that collateral
• Post-petition sales: goods or services you provide after the filing, especially in Chapter 11, are generally administrative expenses, but get payment terms settled before you ship
• Critical vendor status: in some Chapter 11 cases the court allows payment of certain essential suppliers' pre-petition claims, usually in exchange for continued trade terms

Step 5: Watch for preference demands

Under §547, a trustee or debtor in possession can sometimes recover payments a creditor received in the 90 days before the bankruptcy filing, or one year for insiders. This surprises many creditors: you got paid, and months later you receive a demand letter asking for the money back. There are defenses, including payments made in the ordinary course of business and new value you provided after a payment, and there are dollar thresholds below which suits are restricted.

Do not ignore a preference demand, and do not pay it without review. Gather your payment history with the debtor for at least the year before the filing, because the ordinary course defense compares the preference period to your normal pattern. This is an area where a bankruptcy attorney earns their fee.

Step 6: Look beyond the debtor

The automatic stay protects the debtor, and it generally does not protect a separate person who guaranteed the debt. If an owner signed a personal guarantee, you may be able to pursue them while the company's case proceeds, though courts occasionally extend protection in Chapter 11 and individual guarantors sometimes file their own cases. In a Chapter 13 case, a separate co-debtor stay protects certain co-signers on consumer debts, which is a different situation from a business guarantee. Check with counsel before contacting a guarantor.

Also check for payment bonds, letters of credit, credit insurance or a lien right on a construction project. Those can be sources of recovery that sit outside the bankruptcy estate.

Where a collection agency fits

Once a bankruptcy is filed, collection calls to the debtor stop. What remains is paperwork, deadlines and legal strategy. We can help you confirm the filing, organize the claim documentation and, with your approval, connect you with a bankruptcy attorney for claim filing, 503(b)(9) and preference issues. We do not contact a debtor in bankruptcy to collect, and we are not a law firm. If the case is dismissed, the stay ends and the account can usually be worked again.

Frequently asked questions