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How far Can You Go in Bankruptcy Court?
A little known commerce provision assures that growers and shippers of produce get a first crack at recovering what they’re owed in a bankruptcy case. While creditors generally receive only a portion of what they are owed, according to the Perishable Agricultural and Commodities Act, shippers and growers are entitled to line up first and be fully reimbursed. And if the business, particularly in a Chapter 7 filing, can’t pay up, then the shippers and growers can go after company executives personally. The basis for paying off shippers and growers is supposedly that they operate on very thin margins. So when restaurant companies go under, their produce suppliers typically get paid, regardless of what other creditors might get. As one bankruptcy attorney put it, “under PACA, you’re exempt from bankruptcy and your money is held in trust…”
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