Business Bankruptcy Protection

Many smaller commercial businesses may feel helpless when they find themselves low on the list of creditors when a large businesses files for bankruptcy protection. But smaller businesses do have recourse to protect themselves in the form of a reclamation demand. Such a reclamation provides a business the right to demand goods, which had been shipped to a customer, be returned if the customer files for Chapter 11 within a specific time period of receiving the goods. If the goods can’t be returned, the seller’s unsecured claim may be converted into an administrative expense priority claim. This move gives the claim a higher priority than ordinary unsecured creditors’ claims. Further, businesses don’t even have to wait for the bankruptcy filing in order to file a reclamation demand, which can be filed if evidence is presented that the customer is officially insolvent.