Freight Broker Bankruptcy: Key Strategies for Recovering Unpaid Invoices
Freight Broker Bankruptcy: Key Strategies for Recovering Unpaid Invoices
Blog Article
By facilitating communication between shippers and carriers, freight brokers have a significant role in the transportation sector. However, if a freight broker declares bankruptcy and is owed money to you, it can put you under a lot of financial strain, especially if you're a carrier and are waiting for unpaid freight bills. Understanding the legal process and the steps involved can help you recover some or all of your owed money.
In this article, we'll explain what to do if a freight broker declares bankruptcy, how to file a claim, and the best ways to protect your interests.
1. Understanding Bankruptcy Among Freight Brokers
In essence, a freight broker's filing for bankruptcy means they are unable to fulfill their financial obligations to creditors, including shippers, carriers, and other business partners. They can either liquidate their assets or reorganize their debts as a result of the bankruptcy process. Here are the two typical types of bankruptcy freight brokers:
• Chapter 7 Bankruptcy: The broker's assets are used to pay creditors with the proceeds. In this situation, it's less likely that the debtors will receive full payment.
• Chapter 11 Bankruptcy: The broker goes through a restructuring that will allow them to pay off their debts and possibly keep running their business. Although it may be delayed or reduced, creditors may still receive payment.
Knowing what kind of bankruptcy a freight broker files can tell you how likely it is to be able to recover your unpaid freight bills.
2..... Important Actions to Take When a Freight Broker Files for Bankruptcy
It's important to take the right steps right away if a freight broker who owes you money files for bankruptcy. What you need to do is the following:
2.1... Verify the bankruptcy filings
The first step is to confirm that the broker has filed for bankruptcy. The PACER( Public Access to Court Electronic Records) system, which provides case and docket details, allows you to check bankruptcy filings. This verification makes sure that the event is legitimate, and that the broker is not using a delay tactic.
2. 2. Gatter Documentation
Collect all necessary paperwork related to the unpaid freight invoices. Among these are:
• Payment terms and invoices
• Delivery receipts and service documentation
• Emails and correspondence with the freight broker
• Agreements or contracts These documents are essential when bringing a claim in bankruptcy court.
2.3.. Obtain a Proof of Claim from a government agency.
You must file a Proof of Claim with the bankruptcy court once the bankruptcy has been confirmed. The amount of money the broker owes you is set forth in a formal statement. To support your claim, be sure to include all supporting documentation.
A Proof of Claim must be submitted because it could prevent you from being added to the list of creditors who may be eligible for any payments once the bankruptcy proceedings are settled.
3.... Understanding Your Role as a Creditor
Creditors are typically ranked based on the priority of their claims when a freight broker files for bankruptcy. Knowing where you stand as a creditor and how much of your claim you can recover is important.
3. 1. cured vs. Unsecured Creditors:
• Secured Creditors: These creditors have a legal claim against the bankrupt broker's property and other assets, such as cars and homes. They are typically the first to receive a refund.
• Unsecured Creditors: Carriers typically fall under this umbrella, unless a specific security arrangement was reached with the broker. In a Chapter 7 liquidation, unsecured creditors have a lower priority, meaning they may not be paid in full, especially if they are in default.
4..... Creating a Bond Claim
As part of their licensing application with the Federal Motor Carrier Safety Administration( FMCSA), freight brokers are required to carry a surety bond or a trust fund agreement. In the event that the broker does n't pay them, the purpose of the bond is to Advance Global Logistics LLC protect the carriers and shippers.
You can file a claim against the freight broker's bond if the broker owes you money and has declared bankruptcy. Brokers are required by the FMCSA to maintain a minimum$ 75, 000 bond, which can aid in recovering some of your debts.
To submit a bond claim:
• Get in touch with the surety firm that issued the bond.
• Provide service-related documentation and proof of payment for the unpaid invoices.
• Follow the claim procedures as defined by the surety company.
Important to remember that bond payouts are constrained, and that the amount will be divided between creditors if more money is owed.
5. Negotiating a Settlement
You might be able to bargain with the freight broker's bankruptcy trustee in some cases to reach a settlement. The trustee is in charge of distributing and managing the broker's assets to creditors.
You might be able to come to terms with someone who wants to receive only a portion of the payment or come up with a payment plan gradually. This could be a quicker way to get some compensation than to wait until the bankruptcy process is over, even though you may not be able to recover the entire sum.
6. using a collection agency
You might want to work with a collection firm with a focus on the freight industry if trying to navigate the bankruptcy process seems overwhelming. Even in challenging circumstances like bankruptcy, collection agencies have experience recovering unpaid freight bills.
The agency will work with you to file lawsuits, negotiate settlements, and look into other ways to get your money back. Keep in mind, though, that collection agencies typically bill a percentage of the money recovered as their fee.
7.... Protecting Yourself from Bankruptcies of Future Freight Brokers
There are proactive steps you can take to reduce your risk in the future, even though it's challenging to predict when a broker will file for bankruptcy.
• Conduct Credit Checks: Conduct a credit check to check a freight broker's financial health and payment history before establishing a business relationship with them.
• Track Payment Patterns: A broker's repeated requests for longer payment terms or delays may indicate cash flow issues. Be cautious if you intend to do business with them any longer.
• Request Payment in Advance: To reduce the risk of non-payment, consider making a request for payment upfront or using shorter payment terms for high-value shipments or new clients.
• Use Freight Factoring: Freight factoring enables carriers to sell their invoices to a factoring company, who then takes on the task of obtaining payment from the broker. This allows for immediate cash flow and lessens the chance of non-payment as a result of broker bankruptcy.
What is the conclusion?
Dealing with a freight broker's bankruptcy can be stressful, especially if you are owed money for unpaid freight invoices. You can increase your chances of recovering some or all of the money you owe by taking action right away by verifying the bankruptcy filing, gathering documentation, filing a Proof of Claim, and pursuing a bond claim. Additionally, proactive measures like credit checks and freight factoring can help you avoid similar situations in the future.
Knowing your legal rights as a creditor and staying informed will give you the best chance of surviving the bankruptcy process and recovering your receivables.