What remedies do you have to recover goods shipped to a company in the weeks leading up to its bankruptcy? As to those goods shipped 45 days prior to a debtor’s filing, Section 546(c) of the Bankruptcy Code provides a reclamation right to creditors to recover such goods. This may provide you with the ability to recover your goods directly from the debtor.
There are several requirements under Section 546(c). The goods must have been sold in the “ordinary course” of the vendor’s business and the debtor must have received the goods while insolvent. Also, the reclamation demand must be in writing and made within 45 days of the receipt of the goods by the customer (now the debtor in bankruptcy).
If the 45-day period expires after the bankruptcy case is filed, the vendor must make the reclamation demand within 20 days after the bankruptcy filing. As with pre-bankruptcy demands under the UCC, the demand should identify the goods being reclaimed, include a general statement reclaiming all goods received by the debtor from the vendor during the 45-day period, and demand that the goods be segregated. Often times, vendors will file a notice of reclamation with the bankruptcy court.
If you or your company shipped goods to a debtor prior to its filing for bankruptcy, then you should act quickly to file a reclamation claim against the debtor. It may provide you with the ability to recover your goods from the debtor.
Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP. Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at firstname.lastname@example.org.