Personal Bankruptcy Is 20 cents on the dollar a good idea?

[erika]

We are a small company that just received notice that one of our creditors filed for bankruptcy. It seems that the receiver is willing to give us 20 cents on the dollar. Is this a good deal or good idea? Why don't we fight the bankruptcy? I'm wondering if we shouldn't just sue the owners of the company who I'm sure set up the business to fail.

 

[Michael Wechsler]

You should take a look at the balance sheet and other financial figures, as well as who is administrating. If you challenge the rate you may receive nothing as the money will be spent on the challenge. If you are one of the larger creditors it is possible that you could discuss a more favorable rate but many that I know like to take the money before it's gone. It isn't like there is a whole lot being funneled out of a bankruptcy proceeding -- it may have happened before the proceeding which is why the business may have gone downhill!

Regarding suing the owners, unless you can show some commingling of funds or other wrongdoing, they generally would be protected by the corporate form, if it is a corporation. See some of the other posts about "piercing the corporate veil" (or do a search here).