The notice usually arrives by mail or email: your customer has filed for Chapter 11 bankruptcy. You have open invoices with them, maybe goods you shipped last week, and the next question is obvious. Will you get paid?
More suppliers are asking it this year. Epiq AACER counted 6,560 commercial Chapter 11 filings from January through September 2026, up 11% on the same period of 2025. Small business Subchapter V cases grew even faster: 2,442 so far, up 46%. Our Q4 2026 collections outlook covers what is driving the rise.
Here is what a Chapter 11 filing means for the money you are owed, what to do in the first few days, and when a collection agency can still help.
What Chapter 11 means for a creditor
Chapter 11 is a reorganization, not a shutdown. In most cases the business keeps operating, keeps its staff and keeps buying from suppliers while it works out a plan to pay its creditors over time. That is different from Chapter 7, where a trustee sells off the assets and the business closes.
Subchapter V is a faster, cheaper version of Chapter 11 that smaller businesses can choose, generally those with qualifying debts of $3,424,000 or less. Congress has passed a bill raising that limit to $7.5 million for new cases; as of early October it was awaiting the President’s signature. In Subchapter V, a trustee is appointed to oversee the case, only the business can propose a plan, and it generally must file that plan within 90 days. A creditors’ committee is not appointed unless the court finds a reason to.
First rule: stop collecting
The moment a bankruptcy petition is filed, an “automatic stay” takes effect. It stops nearly every effort to collect a debt that existed before the filing, including:
- Starting or continuing a lawsuit over the debt.
- Enforcing a judgment you already have.
- Calls, letters or emails asking for payment of pre-filing invoices.
- Offsetting money you owe the customer against what they owe you.
The stay applies to everyone, collection agencies included. If an account we are working goes into bankruptcy, we stop contact with the debtor right away. Ignoring the stay can expose a creditor to court sanctions, so pause first and get advice if you are unsure.
One thing the stay generally does not cover is a person who personally guaranteed the debt, such as an owner who signed a guarantee on your credit application. Courts can sometimes extend the protection, so have an attorney review the guarantee before anyone contacts the guarantor.
Second: make sure your claim counts
In Chapter 11, the business files schedules listing everyone it owes. If your claim is listed at the right amount and is not marked “disputed,” “contingent” or “unliquidated,” it is generally treated as filed. Schedules can be amended later, though, so many creditors file a proof of claim anyway as a safeguard.
If you are missing from the list, or your claim is marked disputed, contingent or unliquidated, you must file a proof of claim (Official Form 410) before the deadline the court sets, often called the bar date. If the amount listed is too low, filing is how you claim the full amount. A creditor who should file and does not is not treated as a creditor for voting or for payment under the plan.
In practice: get the case number from the notice, find the deadline, check how the business listed your claim, and compare it with your own ledger. If you file, attach your invoices, statements and the signed contract or credit application.
Checklist
Your first week after a bankruptcy notice
- 1Stop all collection contactNo calls, letters or emails about pre-filing invoices.
- 2Find the case number and deadlineBoth are on the court notice.
- 3Check how your claim is listedCompare the debtor’s schedule with your ledger.
- 4Gather your documentsInvoices, statements, contract, proof of delivery.
- 5Review the last 90 daysNote deliveries in the last 20 and 45 days and payments received.
- 6Set terms for new ordersDecide whether to require payment upfront going forward.
- 7Get advice on large balancesA bankruptcy attorney can protect rights with short deadlines.
Rights suppliers often miss
Goods delivered in the last 20 days
If you sold goods in the ordinary course of business and the debtor received them within 20 days before it filed, the value of those goods can qualify as an administrative expense, usually by filing a request with the court. That puts it ahead of ordinary unsecured claims in the line for payment. This covers goods, not services, so a supplier of products has an edge here that a service provider does not.
Reclaiming goods
A seller may be able to demand back goods the business received while insolvent within 45 days before the filing. The window is short: the written demand has to be made within 45 days after the goods were received, or within 20 days after the filing if that 45-day period runs past the filing date. Reclamation also ranks behind a lender with a security interest in the same goods, so it does not always work, but it is worth checking quickly.
Payments you received in the last 90 days
Payments the business made to you in the 90 days before filing can be challenged as “preferences” and demanded back. Common defenses include payments made in the ordinary course of business and new goods or services you supplied after a payment. For a business debtor, if the payments to you during that period total less than $8,575, they generally cannot be recovered. Keep your payment records and delivery dates together; they are your evidence if a demand letter arrives.
Orders after the filing
Invoices for goods or services provided after the filing are not part of the old debt. A business in Chapter 11 is generally expected to pay its new bills as it goes. Many suppliers keep selling but switch to cash in advance or shorter terms until the case is resolved.
What creditors usually recover
There is no standard answer. Secured lenders and priority claims are paid first. General unsecured creditors, which is where most unpaid invoices land, receive whatever the confirmed plan provides. That can be a percentage of the claim paid over several years, and in some cases very little.
You do get a say. Creditors whose claims are affected by the plan vote on it, and creditors can object to it. In a regular Chapter 11, the U.S. Trustee is required to try to form a committee from the largest unsecured creditors, though smaller cases often have none; serving on one gives you a closer view of the case. In Subchapter V, a plan can be confirmed even if creditors do not accept it, if, among other requirements, it is fair and equitable and the business commits its projected disposable income to the plan for three to five years.
When it is still worth placing the account
A collection agency cannot pursue a debtor that is protected by the stay. There are still situations where placing an account makes sense:
- The case is dismissed. Chapter 11 cases do get dismissed, and once that happens the stay ends and collection can usually resume.
- Someone else is liable. A personal guarantor or a related company that did not file may still owe you. An attorney should review this first; our litigation collections team works with affiliate law firms nationwide.
- New invoices go unpaid. Bills for goods or services delivered after the filing are a separate matter. They can be pursued, usually through a request filed in the bankruptcy case by an attorney.
- Other customers show the same warning signs. The best time to act is before a customer files. Missed promises, shrinking partial payments and unanswered calls are signals to move. See when to place a past-due account.
How Snap Debt Recovery helps
When you place an account, we review what is owed and what is realistic to recover. If we learn the customer is in bankruptcy, we stop and tell you. If they have not filed, our commercial collections team works the account professionally and quickly, while the debtor is still operating. Where litigation makes sense, an affiliate attorney can review the claim.
Worried about a customer who is slowing down on payments? Submit your account online or call us for a no-obligation review.
Related: See how our small business collections service handles unpaid invoices from other businesses.
This article is general information, not legal advice. Snap Debt Recovery is a collection agency, not a law firm. Bankruptcy rules and deadlines depend on the facts of each case, so speak with a bankruptcy attorney about a specific account.
Sources: Epiq AACER September 2026 bankruptcy data (ABF Journal, October 9, 2026); U.S. Courts, Chapter 11 Bankruptcy Basics; 11 U.S.C. § 362 (automatic stay); 11 U.S.C. § 1111 (scheduled claims); Federal Rule of Bankruptcy Procedure 3003; Official Form 410, Proof of Claim; 11 U.S.C. § 503(b)(9); 11 U.S.C. § 546(c) (reclamation); 11 U.S.C. § 547 (preferences); 11 U.S.C. § 1189 (Subchapter V plan); DLG, Bankruptcy Threshold Adjustment Act (October 7, 2026).
