In this article, Adam Stein-Sapir of Pioneer Funding, LLC, provides insights on the collection powers of a bankruptcy trustee.
Article Link: https://nypost.com/2023/03/30/bankrupt-nyc-fashion-labels-sales-reps-ordered-to-return-commissions/
Summary
The New York Post reported on a case where former sales representatives of the bankrupt Worth Collection, a New York-based women’s apparel label, were ordered to return their commissions earned prior to the company’s collapse. The directive came from US Bankruptcy Trustee Douglas Tabachnik, targeting around 200 stylists with potential lawsuits if they do not settle their debts. Worth Collection, which was profitable and advertised in high-end magazines, was acquired by New Water Capital L.P. in 2016 and filed for Chapter 7 bankruptcy in February 2020. The trustee’s actions are based on the premise that the commissions paid out could have been used to pay vendors and other creditors. Adam Stein-Sapir from Pioneer Funding Group commented on the trustee’s aggressive approach, noting that these sales reps were not company officers and may not have known that their earnings were at the expense of vendors.
- The trustee is demanding the return of commissions from sales reps, with some being sued for significant amounts.
- Worth Collection was acquired by New Water Capital and filed for Chapter 7 bankruptcy four years later.
- Adam Stein-Sapir commented on the trustee’s strong collection powers and the unfairness faced by the sales reps.
Q&A
What are the implications for sales reps when a company goes bankrupt?
Sales reps may face demands to return commissions earned prior to the bankruptcy, as trustees have the power to recover payments made up to 90 days before the filing. This can lead to financial distress and legal challenges for the reps involved. For more information on bankruptcy proceedings, click here.
How does a trustee decide which payments to recover in a bankruptcy case?
A trustee reviews payments made by the bankrupt company within a specific period before the filing, typically 90 days, to determine if they were preferential or made at the expense of other creditors. The goal is to ensure equitable distribution among all creditors. For a detailed guide on selling bankruptcy claims, click here.
What can creditors do to protect themselves in a bankruptcy situation?
Creditors should file a proof of claim to establish their right to a distribution and consider selling their claim to a trade claim buyer for immediate cash, rather than waiting for a potentially uncertain payout from the bankruptcy proceedings. For steps on how to file a proof of bankruptcy claim, click here.
