Navigating bankruptcy proceedings using AI

For credit managers juggling many responsibilities every day, keeping up with a customer’s ongoing bankruptcy proceedings can be time-consuming. With drawn-out proceedings and lengthy court documents, a customer’s bankruptcy can really weigh on credit managers trying to find the time to do it all.

Why it matters: Artificial intelligence (AI) can help navigate these tricky cases by assisting credit managers in organizing, summarizing and reviewing lengthy documents. There are a lot of nuances to a bankruptcy case that can be intimidating to credit managers. Before, a credit manager may have leaned heavily on legal counsel, but with AI they can break down the basics of a case easily. 

A big step for creditors involved in a bankruptcy case is filing their proof of claim, which can take up a lot of time, especially when a customer’s debt spans several invoices. “I’ve had many clients who are owed millions of dollars and they have hundreds of invoices, deductions and credits between them and their customers,” said Wanda Borges, Esq., member of Borges and Associates (Syosset, NY). “You can take all those files and organize them using AI to determine the right amount of money for the proof of claim.”

Using AI can help credit professionals analyze case documents as well. “AI can also summarize lengthy filings and docket entries,” Borges said. “Sometimes with larger cases the dockets can be 30 or 40 pages. You can run that through AI and find where in the documents your specific concerns are mentioned.”

On busy days, it’s hard to find time to dive into all the dense legal paperwork, but putting off the task can lead to trouble if you’re not staying on top of the case timelines and deadlines. “One of the biggest dangers in a bankruptcy case is missing an important meeting, whether it’s your bar date or the 341 meeting of creditors,” Borges said. “You get busy, you are doing your jobs and suddenly you look at the calendar and realize you’ve missed an important meeting. But you don’t need attorneys like me to be doing this for you; you can have AI monitor it for you and remind you when deadlines are approaching.”

By analyzing different documents using AI, it’s easier to flag inconsistencies early on in proceedings. “You don’t necessarily need to read over all the balance sheets, financial statements and disclosures, if you can feed that through a program like CoPilot and ask it to do an analysis,” Borges said. “AI might notice that a business said they were going to pay approximately 60 cents over the next five years, but the financials show it can only pay 23 cents over the next five years. It can pick up on these discrepancies and warn you, effectively protecting you and expediting your review process.” 

The healthiest relationship credit managers can have with AI is a careful one. AI can be a valuable asset in reviewing, summarizing and analyzing legal documents, but it is not perfect. There is a risk that when rooting out the relevant case citations, statutes or procedural rules for your bankruptcy case that AI could completely fabricate information. Knowing AI’s flaws does not mean the resource needs to be disavowed entirely. Rather, when incorporating it into your processes, be sure to build in steps to fact-check the information it generates, from going over the totals it calculates to verifying any case law it references.

Bankruptcy proceedings entail lots of sensitive information about your business and your customer, so it is important that the AI platform used is secure. “AI tends to share its data, so if you’re putting all your data into it in order to help you create a proof of claim, you’ve got to be careful because it may share that with the next person who uses it,” Borges said. “So, you always have to make sure that the AI platform you are using has a confidential work area that is going to protect your data.”

The bottom line: AI can be a great resource when navigating bankruptcy proceedings, as long as credit professionals know the technology’s limitations. Unpacking all the documentation required in a case can be a lot, but AI can help simplify dense legal filings, giving credit managers a sense of what the process will look like and an expectation for their role in the case.