Creditor Claims Against Distressed Companies

When the business relationship between a company and its creditor is going well, the creditor does not often spend much time thinking about the rights and remedies it might have if the company suffers financial distress later. Oftentimes, creditors do not focus on what rights they have until after distress sets in. When a company enters bankruptcy, creditors' rights and remedies can be altered significantly, and creditors who do not pursue their rights until after a bankruptcy filing could find themselves with diminished recoveries.

Michael J. Riela and Richard W. Trotter, attorneys in the Creditors' Rights and Business Reorganization practice group at the law firm of Tannenbaum Helpern Syracuse & Hirschtritt LLP, will discuss the principal rights and remedies that different types of creditors may have against companies that are in financial distress but are not yet in bankruptcy. They will also discuss how those rights change when a company enters bankruptcy. Finally, they will provide practical tips about how creditors can better protect their interests, both before and during bankruptcy.

Learning Objectives: 

1. Identify some of the principal rights and remedies that various types of creditors may have against distressed companies before bankruptcy, and the legal bases for such rights and remedies
2. Explore how creditors' rights are altered when a distressed company enters bankruptcy
3. Understand the priority of claims in bankruptcy, and how differently-ranked creditors can receive materially different recoveries

4. Recognize how creditors can better protect their interests, both before and during bankruptcy