The Legal Side: Servicing Bankrupt Subscribers

Ken:
I just received a notice from the bankruptcy court. One of my clients is bailing out. They were in financial trouble in the past and just found a white knight savior. Well three months into the project they pull the plug. My question is "What is my obligation to continue to provide services for which I will never be paid?" My contract says that if they stop paying I can stop monitoring. Is this a violation of the proceedings? Or do I just lick my wounds with the past debt and just make him a COD customer from now on?

J.K. in Connecticut

Dear J.K.,
You don't have to continue providing service once your subscriber files a bankruptcy petition. If you do provide service you can charge for the period going forward.

Unfortunately, you cannot insist on getting money for any time prior to the filing of the bankruptcy petition. For any money that you are owed for prior to the petition filing you will need to file a proof of claim with the clerk of the bankruptcy court. But you can go COD going forward or not service the account if you don't want to.

In summary, you are not a public utility that is prohibited from terminating service in a bankruptcy situation.

For those of you who want a more technical answer, I should point out that the alarm contract calling for future services and payments is an executory contract that is deemed automatically rejected in a bankruptcy case unless assumed. Therefore, the prudent thing to do would be to insist on a new contract with the subscriber to be signed after the bankruptcy petition is filed.

Be careful not to demand payment of the arrears on the old contract for the pre-bankruptcy petition period. That demand would be a violation of the bankruptcy automatic stay provision [11 USC 362]. You could of course demand an inspection and reinstatement charge.

You should make it a habit of filing a proof of claim form with the clerk of the bankruptcy court, even is cases where you get a notice that there are no assets and no claim need be filed until further notice is sent out. Often you will miss this additional notice and assets may be discovered in cases. If the claim form or filing is too difficult [in some jurisdictions you may have to file it electronically], then have a bankruptcy lawyer do it. For comparison on what this would cost, my firm would charge around $100 to do this.

If you get a chapter 13 petition notice you should file your claim because that is a wage earners plan and there will be a 36- to 60-month payout, provided the subscriber (the debtor) makes the payments. Payments are made to a trustee who distributes the money usually monthly.

About the author: Ken Kirschenbaum, Esq., is a New York-licensed lawyer practicing with Kirschenbaum & Kirschenbaum PC, a Long Island legal firm with a rich history of assisting clients in security and alarm related matters. Ken can be contacted via email at ken@kirschenbaumesq.com. His website, www.kirschenbaumesq.com, features a great supply of legal information and court rulings relevant to the security industry. You can also sign up for Ken's discussion list from his homepage.

Loading