Commercial Bankruptcies: Helpful Tips For Collecting on Judgments

The items below are excerpted from the Business Bankruptcy News Bulletin. A full issue contains information on dozens of troubled companies, as well as informational and analysis highlights. Please visit the insideARM bookstore for information on subscribing to the Bulletin.

First, bank on the future by creating liens. An important step in any collection plan is to establish liens (legal claims) against the judgment debtor’s real estate and business property. Liens put you in the best position to get paid if the debtor declares bankruptcy or acquires, sells, refinances or transfers property.

Second, do your homework. The more you know about the business or person who owes you money, the more likely you are to get paid. So here’s your opportunity to be a private detective of sorts, and keep tabs on the debtor’s assets, lifestyle and projected financial situation.    

Here’s a little test. Would you know if the debtor moved, expanded or sold a business, or refinanced real estate? Do you know whether or not the debtor cares about their credit rating? Do you know what could pressure the debtor into bankruptcy? If you can’t answer yes to every one of these questions, you’ve got work to do. Periodically write or telephone the person who owes you money.

And third, know when to call it quits. You’ve heard the warning, "Don’t throw good money after bad”. There is much you can do to collect on a judgment, but these efforts cost money. And although most judgment collection costs are recoverable, that won’t do you any good if you never catch up with the judgment debtor. So keep a sharp eye on how much you are spending on your attempts to collect.

Bear Island Paper Company LLC, Ashland, Va., filed Chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Virginia. The firm listed assets of between $100 million and $500 million and liabilities of between $500 million and $1 billion. The filing was under case number 10-31202. For more information contact the court at 800-326-5879.

Extended Stay Inc., the bankrupt Spartanburg, S.C. hotel chain which recently reached agreement on a $450 million equity investment with Centerbridge Partners and Paulson & Co., reported the additional funds could help it emerge from Chapter 11 protection. The company, which has more than $3 billion in mezzanine loans its needs to restructure, also received a competing investment proposal from Starwood Capital Group.

Haights Cross Communications Inc., White Plains, N.Y., has seen the U.S. Bankruptcy Court confirm its prepackaged reorganization plan. The company, which filed its petition last month, is expected to emerge by 3/15 with its debt reduced by nearly $200 million. For more information on this case call the court at 302-252-2560 and refer to case number 10-10062 or case number 10-10003.

Tribune Co., the Chicago, Il. media firm, won permission from the U.S. Bankruptcy Court to extend its exclusivity period for filing a reorganization plan until 3/31, as it seeks to settle certain disputes among creditors that hold some $13 billion in claims.

We the People LLC, Berwyn, Pa., filed Chapter 11 in the U.S. Bankruptcy Court in Delaware. The firm listed assets of less than $100,000 and liabilities of between $1 million and $100 million. The filing was under case number 10-10504. Also filing was We the People USA Inc. under case number 10-10503. For more information contact the court at 302-252-2560.