How to Recover Your Money After a Freight Broker Declares Bankruptcy
How to Recover Your Money After a Freight Broker Declares Bankruptcy
Blog Article
By facilitating communication between shippers and carriers, freight brokers have a significant role in the transportation sector. However, having a freight broker file for bankruptcy and owes you money can put you under a lot of financial strain, especially if you're a carrier and waiting for unpaid freight bills. Understanding the legal process and the steps involved can help you get some or all of the money owed.
In this article, we'll explain what to do in the event that 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 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 filings that bankruptcy freight brokers make:
• 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 their full payment.
• Chapter 11 Bankruptcy: The broker goes through a restructuring that will allow them to pay off their debts and possibly carry on their business. Although it could 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 recover your unpaid freight bills.
2.... Important Actions to Take If a Freight Broker Files for Bankruptcy
When a freight broker who owes you money files for bankruptcy, it's important to act quickly. What you need to do is the following:
2.1. Verify the bankruptcy filings
The first step is to confirm that the broker has actually declared bankruptcy. The Public Access to Court Electronic Records( PACER) system, which contains 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. Gather Records
Collect all necessary paperwork related to the unpaid freight invoices. Among these are:
• Payment terms and invoicing
• Delivery receipts and proof of service
• Emails and correspondence with the freight broker
• Contracts or agreements These are important when bringing a bankruptcy court claim.
2.3.. File a claim proof.
You must submit 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. Include all supporting documentation to support your claim.
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. Secured vs. Unsecured Creditors:
• Secured Creditors: These creditors have a legal claim against the bankrupt broker's assets, including real estate and vehicles. They typically come in first for repayment.
• Unsecured Creditors: Carriers typically fall under this umbrella, unless a specific security agreement was reached with the broker. In a Chapter 7 liquidation, unsecured creditors have a lower priority, meaning they could not receive full payment.
4..... Defending 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 trust fund agreement. In the event that the broker does n't pay them, the bond's purpose is to protect carriers and shippers.
You may file a claim against the freight broker's bond if the broker owes you money and has filed for bankruptcy. Brokers are required by the FMCSA to maintain a minimum$ 75, 000 bond, which can aid in recovering some of your debts.
To claim a bond:
• Get in touch with the surety company that issued the bond.
• Provide service-related proof of service and payment of the unpaid invoices.
• Follow the surety company's instructions for the claim process.
Important to remember that bond payouts are constrained, and that the amount will be divided among the creditors if they are owed money by several of them.
5. Negotiating a Settlement
You might be able to bargain with the freight broker's bankruptcy trustee in some circumstances to reach a settlement. The trustee is in charge of managing the broker's assets and giving them to the 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 strategy over time. 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 complicated cases like bankruptcy, collection agencies have experience recovering unpaid freight bills.
The agency will work with you to file lawsuits, reach settlements, and find other ways to get your money back. Keep in mind that collections companies typically bill a percentage of the amount recovered as their fee.
7. Defending Yourself from Bankrupt Future Freight Brokers
There are proactive steps you can take to reduce your risk in the future, even though it's difficult to predict when a Advance Global Logistics LLC broker will file for bankruptcy:
• Conduct Credit Checks: Conduct a credit check to check a freight broker's financial health and payment history before engaging in business relationships 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 plan to continue doing business with them.
• Request Payment in Advance: To reduce the risk of non-payment, consider requesting 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 getting payment from the broker. This allows for immediate cash flow and lowers the chance of non-payment as a result of broker bankruptcy.
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.