How To Handle Your Subscriber's Bankruptcy - December 8, 2012

How To Handle Your Subscriber's Bankruptcy   
    December 8, 2012

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Question
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Ken
    When you receive bankruptcy information on a customer, how do you cancel them (if they are past due)? I know I can’t request payment to keep the system operating, right? What kind of cancellation letter would you send them? We do not go to bankruptcy hearings because from what I am told you don’t get any money and it’s a lot of hassle.
Donnetta Byrd, Office Manager
Security One, Inc.
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Answer
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    This answer pertains to residential subscribers.  Your first inkling that your subscriber has filed bankruptcy is a notice from the Clerk of the Bankruptcy Court.   That notice will tell you if the filing is for chapter 13 or chapter 7.  You will receive a notice if you're owed any money or if you have a contract with the bankrupt, your subscriber.  
    If a 13, you will be told to file a proof of claim and you will then share in the debtor's plan to pay creditors.  The plan may call for as little as 10% [or less]  or up to 100% of all claims filed.  The payment plan will be from 36 to 60 months.  You do not have to continue servicing the debtor unless you are paid anything owed after the bankruptcy petition is filed.  You cannot pursue anything owed pre petition filing.
    If a 7 is filed, the notice from the clerk will usually tell you whether the case is considered a "no asset" case and therefore no proof of claim need be filed unless you get further notice from the Clerk of the Court,  If the debtor's schedules disclose potential assets the first notice will tell you the date by which you must file a proof of claim in order to share in any distribution.  
    Your contract with the debtor is an "executory" contract and the debtor is permitted to cancel the contract.  If the debtor cancels you can determine your damages and file a proof of claim, though in a no asset case you won't be getting any money.  You do not have to continue servicing the debtor if the debtor owes you money.  If you want to continue servicing the debtor you can demand any post petition money owed, and you don't have to continue service unless the pre petition money is also paid to you.  You cannot however make any demands on the debtor for pre petition payments that are owed.  As far as a cancellation letter from you, it's simple.  You tell the subscriber that there is a breach of contract, you're owed money and you're terminating the contract and services.  Give a specific date.  You should then file a proof of claim and maybe get lucky.  
    You should read the notice from the Clerk's office carefully because lots of money is collected and distributed in bankruptcy cases.  You need to file a proof of claim to share in the distribution.  I've been a United States Bankruptcy Trustee for over 36 years and my office has very experienced bankruptcy attorneys.  If you need some expert advice call Stacy Spector, Esq at 516 747 6700 x 304 or Michael Sabella, Esq at ext 329.  Be sure to mention you're in the alarm business and on my email  list because they're not use to giving out free advice.
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