The sub has been using a factoring company which we were not aware of. We’ve never received a preliminary notice or anything. The company has filed BK and is now using a DBA and apparently has not paid the factoring company yet. The factoring company reached out to us and demanded that we send the subs funding to them. Never had this happen so I am a bit confused, we know the sub has suppliers that need to be paid but unsure what to do with the factoring company.
Most likely, the factoring copany will need to file a claim in the sub's bankruptcy action as a creditor. However, you shold check your written agreement (if any) with the sub. If it requires or permits you to pay the sub's expenses on a certain project, then the payment to the factoring company may be proper. If you decide to pay them, I suggest you have a written release drawn up that says the factoring company will indemnify, defend, and shield you from any subsequent claim by the sub (in bankruptcy or otherwise) regarding the payment. Because bankruptcy court is a unique place with unique rules, I recommend you consult with bankruptcy counsel before proceeding.