Thursday, September 03, 2015

Help! My publisher is declaring bankruptcy!

OMG. I just learned that my publisher is filing bankruptcy. The owner is in the process of returning rights to us but is there anything else I need to do? I was positive you answered this question before but in my current state of disappointment and fear I couldn't find it.

I'm assuming this is a small publisher, maybe one or two owners. If they are filing for dissolution of the business, secured creditors will get first dibs.

If the publisher owes you money, you're an unsecured creditor. You're in line with everyone else to get paid from the proceeds of the dissolution.

But, where this gets tricky is that the publishing contract the publisher has with you is an ASSET, not a liability. It's worth money.

In most bankruptcies, a business can't simply return assets before the bankruptcy is resolved.

What they can do is sell, transfer or assign assets to another company who takes on the debt as well as the assets. (When Skyhorse bought Nightshade, this is what they did.)

The first thing you're going to do is make sure that any rights reversion is in writing. Real writing, on paper, not email.

The second thing you're going to do is have your books removed from sale at once.

If you're not going to get paid from these guys, it's smart to make sure they don't get to keep the proceeds from sales any more.

Third: Check Victoria Straus's blog for information about the publisher. If there isn't any, make her aware of this.

Fourth: beware of online hysteria about this. Writers can work themselves into a frenzy over very small things, so you won't be surprised to hear that it's frenzy to the nth power when something like this which really does matter. A lot of terminology gets thrown around by people who are well-meaning, worried, and badly informed. Take most of what you hear with more than a grain of salt.

Depending on where you are in the publishing process you now have a book that has been published but can no longer be offered for sale, or a book that has NOT been published, and the rights have returned to you.

It's easier to resell the second. If you query, you say "this was accepted for publication by SinkSankSuck Publisher who have recently declared bankruptcy and all rights returned to me." You put that at the bottom of the query along with your bio and writing credits. In other words, don't lead with it. It's not a selling point.

If you have actual books for sale, and the rights have been returned, you're better off querying a second book, and then discussing the first (or previous) books with the agent or publisher who is interested in the New Book.

Most important: this will not kill you. It might not make you stronger (god knows I'd be Serena Williams if setbacks really made you stronger) but it's not a death knell for your career or for your books.

Get everything in writing from the publisher. Save EVERYTHING. Be calm in your communications. The publisher is probably hysterical at this point with fear and shame, not to mention in a panic over money. They're not going to be calm about anything most likely. That doesn't mean you respond in kind.

You WILL get through this, and if my experience with publisher's bankruptcies is any indicator, you'll be better off in a year than you are now.

Any questions?


Lisa Bodenheim said...

Whoops. And there Janet set off the Grinch song (not the movie but the old cartoon) in my head for the day, "sinksanksunk."

Opie: Wow. What a lot to deal with but you've come to the right place for advice. And thank you for sharing your story with us so that all of us can learn what to do should it happen to others of us. And, yes, focus on that next book

lynneconnolly said...

I was actually involved in this situation, when Triskelion went bankrupt (voluntary bankruptcy)
1. Bankruptcy proceedings are federal, not state. You signed your contract under state law, but the bankruptcy courts have the power to ignore the bankruptcy clause in your contract. So you're stuck.
2. The first thing the courts did in the Triskelion case was to freeze our contracts. That meant that if your contract covered, say, 7 years, the clock stopped ticking.
3. You signed the rights to publish in certain formats. The first thing you do is register as a creditor, so that you get access to all the information you need. You probably won't get paid, as everybody else is first in the queue, but it's worth doing anyway.
4. Wait, and then wait some more.
5. Get on with writing books for somebody else. Do not let the case take over your life.
6. In Triskelion's case, a publisher (Siren) bought our contracts at the auction. They were offered as one lot, although the courts could choose to offer them separately, as they might for any other asset. So if there are star authors, they could be auctioned separately.
7. The new publisher immediately gave us our rights back, which was very good of them. They were under no obligation to do so. They could have sat on them, or published them, if they'd wished.

Triskelion was a small publisher, and the assets were rolled up fairly quickly, ie within a year, but proceedings can drag on. So the most important thing for you to do is to take care of business, ie register as a creditor, and then get on with your career. If you still want one.

Anonymous said...


So sorry, OP :(

Laura Mary said...

Gosh, what a nightmare - you have my sympathies.

Janet - I really appreciate your comment that the things that don't kill us don't always make us stronger when so often it's the little things that wear us down. It's a saying that really bugs me!

OP - best of luck, try and hang on to the silver linings (at least you're not the one filing for bankruptcy!)

Colin Smith said...

Well, first, well done Opie for having a publishable novel. Let's not forget that achievement. But also, sorry you're having to go through this mess.

Janet, oh mighty, majestic, beloved Sharky One: In your response, you seem to assume there is no agent involved in the situation. That might be the case with Opie, but I take it things would be different if Opie had/has an agent? Wouldn't the agent be more involved in protecting his/her client's interest throughout the whole bankruptcy situation, taking care of many of the things you are directing Opie to take care of?

E.M. Goldsmith said...

My dad had this happen to him. Both his publisher and his agent went under. His book was selling really well and suddenly there were no more printings. He had great reviews - he is often compared to Terry Pratchett. The bookstores sold out of it consistently. Now he is in some sort of weird limbo. Alas I didn't know about Janet back then so neither of us knew what to do. This is a bad situation but hopefully with Janet's guidance one that can be overcome. My dad has a follow up book that is even better than the other one so this did burn him right as he was really breaking through. So I will be interested in what other writers have done in this circumstance so I can guide my dad. I really love this blog.

AJ Blythe said...

OP, I know Secret Cravings went belly up this week and it has been discussed quite a bit on a loop I'm on (by other authors affected).

I know the authors on my loop are quite distressed and wondering what to do. I know they think rights will be returned in a few weeks but JR seems to indicate that probably won't happen. Perhaps contact some of the other authors affected? Sometimes being able to talk it through and seeing what others are considering or know can be a big help. Just mind the hysteria QOTKU warns of.

It's a tough time for you OP. Wishing you the best of luck as you muddle through. Hope there are bigger and better things on the horizon for you.

Donnaeve said...

How disappointing this must be. No. Let me say it like I thought it. Boy, that sux! I feel for the OP being caught up in this. I've been on the receiving end of a company bankruptcy, and it ain't fun. That was a lot different than what this entails, however, I did see similarities in Ms. Janet's response. For instance, being an unsecured creditor. That is what the employees of my company were considered. A bankruptcy for a company the size of mine (global/95,000 employees at one time) takes YEARS. They declared it in 2009 and I think some aspects of it are STILL tied up with the courts.

Hopefully this will be resolved as quickly as possible and as Ms. Janet points out, you'll be better off - although right now it might seem hard to believe.

nightsmusic said...

I am not published and have never faced something like this, but I wanted to say to the Opie that I am so sorry this happened! What an awful thing to think, one minute you're high on excitement that you're published and the next, dropped in a cavern because you have no idea what the future holds. Along with the other advice (great advice from Lynne Connolly to register as a creditor!) is the advice Janet gave about querying your second book. Go for it! Don't let this stop you. I realize it's like starting over because you're 'untried' again, but you need to be proactive and what better way than to continue to pursue what you love.

Good luck to you!

(Hey! No cabbages this time! No picture...hmmm...)

Unknown said...

I second Colin's question.

Sometimes this whole industry is like watching Mike Tyson fight in slow motion.

"Is that acceleration? Did his left hand just twitch? Oh, that jab might land in 30...29...28..."

So Opie, get ready, get set, and wait! My best advice is don't send any nasty emails, but most humans know this. That, and start digging through your equivalent of the box I hide in my basement marked "Important stuff!"

Good luck!

nightsmusic said...

I need to qualify my comment from earlier. I'm not published in novel form but a lot of essays so it's different. Sorry.

Dena Pawling said...

There are several different types of bankruptcies. For businesses, it's usually chapter 7 or 11. A 7 is a dissolution. An 11 can be used to reorganize or as a dissolution. The end goal of the bankruptcy case matters to you.

I agree with the recommendation to register as a creditor.

If you are owed a LOT of money, or you have a LOT of books with this publisher, it may be worth signing up for an account on PACER, which will give you INSTANT access to everything. My firm pays ten cents per page. Not sure if it's the same for everyone.

In my experience with business bankruptcies [which may or may not be relevant to the case here], the business owners are very sad that this action was required [remember, in a dissolution case, they just lost their entire investment and sometimes their life dreams], and most of them want to “make things right” but are now unable to do so because of the requirements of the bankruptcy code.

“The owner is in the process of returning rights to us.” The owner may or may not be able to do this, depending on what chapter the business filed under and the end goal. In a chapter 7 case the assets belong to the trustee, and in a chapter 11 dissolution case the process is different but the end result is similar. Even if the owner returns them to you, the trustee can take them back to sell. Selling the assets does not necessarily require selling the entire business. The trustee can sell the assets and use the proceeds to pay the creditors [usually a very small percentage of the actual amount owed, and yes, you would be at the end of the list], or the trustee can sell the business entirely, which does not necessarily mean the new owner now owes you the full amount of your claim.

The more unsettling proposition, at least in my opinion, is what the new owner will do with those rights, and how long it will be until you can get them back.

I represented a creditor in the Easy Life Furniture bankruptcy case earlier this year. It was a chapter 11 dissolution. The bankruptcy court terminated all of the leases early [which it can do], so the good news was my client got his building back faster than it would have taken me to finish the eviction case in state court. The bad news was the sale of assets did not even result in enough money to pay the overdue sales tax. Yes the government usually gets first dibs. My client had to kiss $500,000 goodbye.

Keep writing and keep the faith. Good luck.

KC said...

Question--is there anything that agentless authors should be including in their contracts with publishers to safe-guard their interests in this sort of case?

Elissa M said...

OP, you have my sympathies and hopes that things will turn out okay for you and the other writers involved.

I sold a commissioned painting to a client who went bankrupt. I had no idea her finances were in such a state. The check she gave me bounced, so I lost the painting, the income, and the bank fee for the bounced check. As I was on the bottom of the list, I never saw any recompense. The client lost everything. (I didn't have the time or resources to fight to get the painting back. It was better to just move on.)

Some people think bankruptcy isn't so bad. The reality is that it impacts way more than the insolvent person/business.

Unknown said...

OP, I'm so sorry, but deep breaths. Onward and upward. Cup of tea, go over Janet et al's advice (how's my Latin?), and proceed on an even keel (nautical lingo?).

I live in fear of this. Divertir Publishing is not even listed on Victoria's website so it may be considered minuscule press. I'm proof you shouldn't marry the first boy you kiss, but they have been good to me, and it's been a learning experience.

All experience is, I guess.

Pharosian said...

Very sorry to hear that your publisher went under, OP. That's one of the things that bothers me most about the publishing business: the lack of control and general helplessness that new authors feel throughout the process, but especially in a case like yours. Best wishes for a speedy recovery!

Carolynnwith2Ns said...

Just when you thought it was safe to go in the water, you jumped in and the water bit back. Sometimes swimming in the big pond sucks. Breathe baby breathe. You succeeded once, you will again.

Anonymous said...

To the original questioner, I am very sorry to hear this. It's truly the pits.

At Rocky Mountain Fiction Writers in Denver a few years ago, we (being the Gnomies, my writing crew) met a lovely fantasy writer. She had a luscious story. My word, could that woman write. I think she'd been talking to an agent and they met at Denver or she had just signed with the agent. Anyway, she either had agreed to sign with the agent or had just signed with her. Yay!

Beth, one of the Gnomies kept up with her. The book sold to Night Shade if I remember correctly and did pretty well. The second book sold. Oops her publisher filed bankruptcy and authors scramble, trying to get their rights and contracts.

It was a disaster. She finally got everything reverted to her. Her agent had problems trying to sell the third book. I assume because the two were already published via the bankrupt publisher. Maybe the sales weren't strong enough. I don't know. The author decided to do a kickstarter campaign and publish the books on her own.

Anyway, it was very stressful for the author, understandably.

I've had several small publishers contact me about Far Rider due to various contests and I've declined so far due to this author's experience. I realize it doesn't happen that often, but it could seriously disturb my calm.

The road to publishing is fraught with serious suxor.

Unknown said...

Nice to have a bankruptcy lawyer in the Shark's ocean of blog commentators. Thanks Dena. Seems to me, and I'd ask for free legal advice from Dena, that whoever acquires the publication rights also acquires the conditions of the contract. Hopefully you have clauses in there that cover what to do when you're not paid, published or sold, and that those clauses provide provisions for reverting the rights if the contract clauses are not met. One more reason for having someone take a very close look at contracts. And another reason why an agent is such a good idea.

Anonymous said...

Bankruptcy is scary, and it's really scary to not KNOW what is going to happen. But I think Janet's advice can give you, OP, a good support. You're no longer hanging from a thread - you've got a bit of a floor under you.

I like Janet's suggestion of putting it in the query letter (in the housekeeping section) - that way, the agent/editor can see that the novel was good enough to be picked up, and it wasn't the author's fault it wasn't published.

And Lynne's experience and advice is also helpful. And Dena's expert advice.

Publishing with small publishers can be very rewarding, very trying, or both. Because a small publisher relies on a much smaller group of people (an editor or two, a publisher, maybe a tech person), all it takes is for one person to get seriously ill, and everything is put on hold. But you get better royalties with a small publisher, and you often get more personal attention and support. There's a trade-off there.

And it isn't only small publishers that go bankrupt (although there's definitely more risk there). Houghton Mifflin Harcourt filed for bankruptcy in 2012, with billions of dollars in assets and billions of dollars of debt.

I don't think there's anything I can add to what others have said, except to say: OP, you're a good writer, and you will get through this. I know I would be bawling my eyes out, and that would be normal in this situation, but after that, wipe your eyes and keep writing. Remember: someone has already decided your work is good enough to publish. And yes, you can do it again.

Kate Larkindale said...

A similar thing happened to me earlier this year when Musa Publishing closed - they didn't go bankrupt, just closed shop before that became necessary. It's frustrating because now my published books aren't available anymore (except, it appears on thousands of pirate sites). But on the plus side, all the authors got paid whatever royalties were owing and had the rights to their books reverted within a day or two of the publisher closing. I know a lot of authors have gone on to re-sell their titles to other small presses, or to self-publish them. I haven't because I now have an agent and she recommended waiting to see what happened with other books we currently have on submission.

But it isn't the end of the world. As long as you get the rights back, there are prospects for the future of those books.

Anonymous said...

Oh geez. When two of the slowest moving industries, publishing and the legal system, get together-- be prepared to wait. And wait.

I remember when Triskelion went under. A friend was about to have her first book published with them and then, sorry, not gonna happen. SO frustrating. Heartbreaking, really. Good grief, was that 2007? Now I feel old.

Back then social media was either non-existent or too new to be popular. Even so, there was a LOT of anger and vitriol and many ugly words being thrown about online in public, or in places that were semi-private, which were then repeated/discussed in public. And while all of those feelings are completely understandable, I'd advise you to vent them to your cat. Or your favourite throw pillow. And keep it off the internet.

I didn't remember the name of that publisher until Lynne mentioned it. But I do still remember some of the names of the people (writers and non-writers) who were the angriest. It's not a fond memory. Does my opinion matter to any of them, in any way? Nope. But I'm pretty sure I'm not the only one who remembers.

As frustrating and scary as this is, and will continue to be for a long while, try to visualize a time when you're past it. As Janet said, you WILL get through this. Keep your focus on long-term goals. Be professional, always, with everyone. And write another book or five.

Good luck and best wishes.

Anonymous said...

Repeat after me. Julie Weathers is not allowed to go to book stores without adult supervision. Criminy. I went in for one book and $91 later I escaped.

I asked the saleslady where I could find Gone With The Wind. I was trying to catch up on the latest best sellers and was a bit behind. She laughed nervously and hurried behind her desk. Thankfully, I resisted buying the Poe.

John Frain said...


With some adult supervision, you'll walk out with $182 bill. I'd suggest leaving your wallet in the car and just walking in with 40 in cash.

Doesn't work for me, of course. I don't park far enough away. Next time, I'm parking at 7-11 and hoofing it to the book store.

(You like how I used "hoofing?" That was just for you! I'd be regular ol' walking for most other folks.)

Anonymous said...


I love how you used hoofing. Oh, I tried just taking in limited money and I invariably go back to the car.

Thankfully, I have no money. I'd buy books like this collection of Poes.

Kim English said...

Just wanted to add that many times the contract has a provision for what happens in the event the publisher goes bankrupt, and the news that the publisher "is going into bankruptcy" or the like doesn't necessarily mean they've actually filed-- when people say "I'm in bankruptcy" sometimes that means they have an appointment with a bankruptcy lawyer in three weeks. So there may be a window to get your rights back. best of luck

lynneconnolly said...

The bankruptcy clause in a contract, Kim, is worth exactly nothing. The bankruptcy courts have the power to overule and ignore the clause. You cannot claim your rights back if a company declares bankruptcy, because federal law trumps state law.
The courts also have the right to pull back any contracts. If you got your rights back just before (maybe a year or more, but that hasn't yet been tested), then you're just as stuck.

Kim English said...

True. I was inartfully commenting that it's not necessarily a hopeless situation for the OP

Panda in Chief said...

Wow! This is a scary subject. Thanks for all the insight into this question, esp. Lynne Connolly's comments, which sound like you know what you are talking about. I had a situation not quite like this, but where I determined that I had to get my rights back after signing a contract. Again, a amall publisher, but with a kind of "new paradigm of publishing" business model. This publisher has authors build your own editorial & marketing team, no one gets an advance or paycheck, but a higher royalty rate. I got drafted by an editor who was trying to build the children's list. Just as we were wrapping up the design and editing, she got "let go." I thought long and hard about it and decided to see if I could get out of my contract. Fortunately, I had done a very successful Kickstarter project to get some funds for some of the production work (scanning all the artwork, etc.) so I had enough money to pay the designer and my editor. Ironically, with no support for children's books, with my editor now gone from the company, I think they probably made more from what I paid them then they would have if I had stayed with the publisher after the editor's departure. I felt really good about that, and the book looked really good.

I then self published the book, not wanting to go back to go and start querying again. I'll do that with the next book. I had so many people supporting my Kickstarter I didn't want to make them wait any longer than I had to.

As to Elissa m's loss of her painting commission, I learned (the hard way, like you did) not to give people who commission paintings or buy on time until they have paid in full and all the checks clear. Really, can't people steal from people with more money than writers or artists?