When a retail customer files for bankruptcy

The filing triggers an automatic stay, which stops collection activity. Existing unpaid invoices become unsecured claims unless a specific protection applies. Whether to keep shipping is a commercial decision with legal consequences: goods delivered after the filing are usually treated differently from goods delivered before it, and many suppliers stop until terms are clarified.

Retailers in this position often seek authority to pay certain suppliers they cannot operate without. Being designated in that category, where the regime allows it, is worth far more than any argument about the merits of an invoice.

Reclamation allows a supplier, in defined circumstances and within a short window, to demand the return of goods delivered shortly before the filing. Administrative priority can apply to goods received by the debtor in the days before filing, giving a claim better standing than general unsecured debt. Preference works the other way: payments received in the period before the filing can be recovered, subject to defenses such as ordinary course of business.

All three are time-sensitive and all three have technical requirements, which is why the first call is to counsel rather than to the customer.

General unsecured claims in retail cases frequently recover little. Suppliers who do better are usually those who acted in the first days: asserted the claims that carry deadlines, documented deliveries precisely, and negotiated terms for continued supply rather than shipping on hope.

Documentation discipline is the common factor, and it is the same discipline that governs deduction disputes in ordinary trading.