The Junkitz bankruptcy is moving toward being finalized now that the company’s assets have been disposed of at auction and the auctioneer’s report filed with the court. On June 20th, the bankruptcy trustee filed his application for compensation with the court. Once that is approved (the hearing is scheduled for August 20th), then the court can distribute the remaining funds to the company’s creditors as required by law depending on their status as secured or unsecured creditors and the amount of funds remaining.
Part of the filing for compensation by the trustee contains a statement of “Anticipated Distribution to Creditors” – and a lesson for any company that does business by accepting credit from its’ customers. The anticipated distribution in the Junkitz case is: Attorney 100% of claim, Secured Creditors 4.06% of claim and the line for General Unsecured Creditors is…blank, meaning they will get nothing.
Approached for comment about the upcoming resolution, several Junkitz creditors declined comment. Former Junkitz designer Teresa Collins issued the following statement:
It is always sad to deal with situations such as this. I knew as a unsecured creditor that I would never receive payment for all the designs and artwork that I created. I am sorry for all the creditors listed, both secure and unsecure that will not be paid. It has been difficult for all parties involved.
The lesson in the sad saga of Junkitz is that if you are extending credit to someone as part of your business you really should consider the option of purchasing credit insurance. Credit insurance works so you buy insurance against the possibility of someone defaulting on a debt owed to you due to circumstances such as bankruptcy. You would then file a claim for payment from the insurance company instead of from the debtor.
Credit insurance can actually be be very affordable, and can save your business if you are cannot afford to write-off (or even suffer a lengthy wait for payment) on credit you are granting.
If you would like to learn more about credit insurance and how it might be useful for your business, I wrote an article about it for the March/April issue of Scrapbook Business magazine that included an interview with Gene Goudy, Senior Vice-President of brokerage firm ARI Global and a well-respected expert on credit insurance. That article is now available online by clicking on the link above and going to page 64-65, or is on page 63 of the print version of the magazine.