PA – Creditors Rights Img

Creditors' Rights & Bankruptcy

Critical Vendor and Section 366 Utility Motions

A reorganization of a company under Chapter 11 of the U.S. Bankruptcy Code can lead to creditor concern and doubt about when and if the debts will be paid. One tool a debtor under Chapter 11 may use is to designate certain creditors as “critical” vendors. This designation is often coveted because a Creditor’s pre-bankruptcy claim gets paid, in whole or in part, right away. But the trade-off is that the creditor must continue to extend credit to the Chapter 11 debtor which involves additional risk. KMK attorneys have a long history of experience with critical vendor arrangements and know the traps to avoid and key protections to incorporate into these agreements.


Section 366 utility motions are another tool that Debtors sometimes use that often do not fully protect utility companies to the fullest extent that the Bankruptcy law allows. KMK attorneys take a proactive role in the process to ensure that utility company clients’ interests are being protected with cash deposits, advance payment arrangements and other security that is acceptable to the creditor. In the event of litigation, KMK has substantial experience and practice in bankruptcy courts that provide us with the ability to champion and safeguard our clients’ interests.

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