Should I collect a debt from a bankrupt customer

Business owners have a difficult choice to make when a customer does not pay their bill. The matter is further complicated if that customer files bankruptcy. At that point, you have to decide if it is worth your time to go after them for the debt.

In some cases, collecting debts can take a long time and cost more money than it’s worth. However, there is often a considerable amount of money lost because businesses believe that collecting debts from customers in bankruptcy will take up too much of their time and resources. This is why working with an experienced business attorney can help you. An attorney can help you weigh the pros and cons of pursuing the debt. Below are a few steps to help you determine if you should attempt to collect debts from bankrupt customers.

Stop collection activities: As soon as you find out that a debtor has filed for bankruptcy, mark the account as being in bankruptcy.

Read the debtor’s bankruptcy papers: The papers will tell you what property the debtor claims to own, which items the debtor thinks are safe from being sold in bankruptcy, and the identity of other creditors.

Attend a meeting of creditors: This meeting is an opportunity for you to question the debtor about details relevant to your claim.

File a proof of claim: The proof of claim is a one-page form that essentially says “I want to participate in the bankruptcy proceedings.”

Chapter 11: Attend a hearing regarding the debtor’s repayment plan: This will allow you to propose a repayment plan and you may be able to vote on which proposed plan gets adopted.

Chapter 13: Attend a hearing regarding the debtor’s repayment plan: At this hearing, the court will decide whether the debtor’s proposed repayment plan should be confirmed.

Follow through: Contact the trustee if you have any additional questions. Do not contact or harass the debtor because doing so may forfeit your claim for payment under the bankruptcy.

Collecting unpaid debts is essential to the success of any business. Texas attorney Andrew Weisblatt is a skilled Houston B2B business collections attorney who understands how to effectively collect from businesses that may be reluctant or unable to pay their outstanding financial obligations. To schedule an appointment with Mr. Weisblatt, call our Houston office today at 713-666-1981.

Sources

http://smallbusiness.findlaw.com/business-debt-and-bankruptcy/small-business-debt-collection.html

http://www.avvo.com/legal-guides/ugc/monitoring-and-collecting-your-accounts-receivable

http://www.nolo.com/legal-encyclopedia/bankrupt-customer-pursue-payment-29574.html

http://smallbusiness.findlaw.com/business-finances/collecting-debts-owed-by-a-bankrupt-customer.html

http://www.nolo.com/legal-encyclopedia/business-debt-collection-29910.html

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