I think this question was asked before, but I want to be sure I know the
answer: Is there risk associated with selling to a debtor in possession in
a Chapter 11 bankruptcy? Is there a safe way to sell to a debtor in possession
- a DIP?
Answer: The Bankruptcy
Code encourages vendors to sell on credit post-petition by offering an
administrative priority claim. Unfortunately, an administrative claim
may go unpaid if the debtor becomes insolvent; therefore, a credit professional
must carefully evaluate the risk before agreeing to sell to a DIP on
open account terms. The safest way to sell to a DIP is by requiring wire
transfer payments in advance. |