Legal Question in Bankruptcy in Illinois

Can I file a small claims lawsuit against a company that will soon be filing bankruptcy? The company in question has not delivered roughly $1,700 in goods and services that were paid in full at the time of contract signing. The company acknowledges that they have no intention of honoring the contract. I assume that, due to the company's insolvency, claimants in the bankruptcy case will receive nothing. Do I have any other recourse?


Asked on 10/08/09, 11:02 pm

1 Answer from Attorneys

Adam S. Tracy Securities Compliance Group Ltd

You can file a lawsuit, but I would advise you not to. The proper venue for your lawsuit may be in bankruptcy. Bankruptcy law provides for the filing of what is known as an "Adversary Complaint". Usually, in a bankruptcy, a corporations assets are either liquidated to pay creditors (Chapter 7) or the company's assets are reorganized and a payment plan is proposed (Chapter 11). Most likely, in a Chapter 7, your chances of recovering anything are slim. In a chapter 11, you will likely not receive full value; average recovery usually comes in around 30-40%. AN EXCEPTION TO ALL OF THIS is the Adversary Complaint. In short, if a creditor can prove that the debt was incurred via fraud (such as, for instance, where a company ordered goods it clearly had no intention of paying for), that debt will become known as "non-dischargeable". That is, the bankrupt company will have to pay the debt in full, irrespective of what it may propose under, say, a plan of reorganization. Somewhat complicated area of law here. Feel free to email me if you have any further questions; [email protected] Thanks.

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Answered on 10/13/09, 11:11 pm


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