Ways to tell if a successor company owes you money

On Behalf of | Sep 23, 2021 | Uncategorized |

A company that has recently gone bankrupt or otherwise gone out of business may have owed you an outstanding balance. You observe that a new business has emerged from the ashes of the old. This is a successor company, and it may still owe you the money that the old business has failed to pay.

Chron points out that generally successor companies do not assume the liabilities of their predecessors, but exceptions do exist. The successor company may have given you notice that it will assume the debts the old company was liable for. If not, there are still ways to tell if a successor company remains responsible for money owed to you.

Implying consent on debt

A successor company might give you implied consent that it will take on debts from the prior company. This could happen if the successor business makes regular payments to you on a debt held by the old company. This could imply that the new business will accept responsibility to pay off the remaining balance on the debt.

The new business is not different enough

You may believe the successor business is not different enough from the old company. It might have a different name and location, but its leadership and product line are practically indistinguishable from the old business. It is possible that if you litigate the company to hold it liable for old debts, a court may rule that the business is in fact not different enough to avoid liability.

A new business merged with the old

If a different business bought the old business, a merger or consolidation may have taken place. This is important to establish because this means the new business has likely assumed the old company’s contracts and obligations. If so, the new business may be responsible for the debts the old business has not paid you.

Created for creditor evasion

Sometimes business owners close down their operation and merge with a new company for the purpose of evading creditors. A court may determine this has happened for a number of reasons. The new company may have bought the old company at a much lower price than it should have received. The timing of the sale may be to thwart your efforts to collect from the old business. Regardless, a court might determine fraud has occurred and will hold the new business responsible for its obligations.