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What to Do After the Entity With Whom You Entered into a Commercial Contract Files for Bankruptcy in Florida

If you are someone to whom a business owes money and that business files for Chapter 11 bankruptcy, you may begin to hold grave concerns about whether or not you’ll get paid in full… or maybe whether you’ll get paid at all. Creditors do not lose all their rights to collect just because a debtor files for bankruptcy, though. If you find yourself in that position, be sure you act without delay to retain the services of a skilled South Florida commercial bankruptcy attorney to preserve your right to collect, or at least minimize your losses.

Recently, a Tampa builder was in exactly that sort of position. The builder had inked a deal with a local veterinarian’s LLC to do approximately a half-million dollars of interior finish work on the veterinarian’s new clinic in Tampa. However, in the middle of the project, the LLC filed for Chapter 11 bankruptcy.

The builder wisely took the step of retaining counsel and filing a claim in the bankruptcy case. In most bankruptcy cases, a creditor has only a limited period of time in which to file a proof of claim. In a Chapter 11 case, the bankruptcy judge will enter an order that sets the deadline date for that case. Soon after the court enters that order, the debtor is required to send notice to all known creditors telling them when that deadline date is.

If you, as a creditor, file after the deadline date has passed, your right to receive payment for your claim may be lost. In fact, it will be lost unless you can show that your failure to file by the deadline date was due to what the law considers “excusable neglect.”

After the Tampa builder filed its proof of claim, the LLC filed an adversary complaint, arguing that the builder had breached the contract by “failing to correct deficiencies in work performed” by the builder’s general contractor.

The dispute went to arbitration, where the builder asserted that the veterinarian fraudulently procured the contract and that the veterinarian’s actions had the legal effect of making the contract “void ab initio,” which meant it was invalid from the beginning and not enforceable. Specifically, the builder provided testimonial evidence that the veterinarian “materially altered the [contract]” and did so without the builder’s “knowledge prior to execution.’

That argument by the builder was successful and the arbitrator declared the contract void ab initio. Even though the contract was not enforceable, the builder was still entitled to be paid for the work it had completed under the legal theory of implicit quantum meruit. The arbitrator concluded that the value of the builder’s work was $137,100 and set the award in that amount.

In this case, the LLC filed for bankruptcy, but the builder was still able to recover more than $100,000. If an entity that owes you money files for bankruptcy, that is not necessarily the “end of the line” for your ability to collect that debt. The law may still allow you to collect some or all of the sum owed to you. To enforce your rights, retain the knowledgeable South Florida commercial bankruptcy attorneys at Stok Kon + Braverman . Our attorneys have many years of helping creditors to protect their interests through successful claims in Chapter 11 bankruptcy cases.

Contact us online or by calling (954) 237-1777 to schedule your consultation.

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