Collecting Debts or Payments from Bankrupt Customers

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How to Collect from Bankrupt Customers

Sometimes pursing a bankruptcy customer will not make the best financial sense. Business owners should weigh the cost-benefit of suing. B bankruptcy lawyer can help businesses make that decision.

What Is Needed to Pursue a Bankrupt Customer?

In order to collect debts or payments from bankrupt customers, you must do the following:

  1. Automatic stay compliance: When you receive notice that your customer has filed for bankruptcy, you must temporary stop collection. You need to allow the customer to go through the bankruptcy process.
  2. Examine the bankruptcy notice: The bankruptcy notice should inform you whether the customer has any remaining money for you to collect. Moreover, you should look at the notice carefully to determine whether it is an accurate depiction of the assets that your customer has.
  3. Attend the meeting of creditors: At this meeting, you can question the customer to see if he is hiding any assets.
  4. File a proof of claim: This will tell the judge that the debtor-customer owes you money and that the judge needs to consider your claim.
  5. Chapter 11 or 13’s Repayment Plan: If the customer filed a Chapter 11 or a Chapter 13 bankruptcy, then he is required to repay his debt. Thus, you will need to attend this meeting to help decide whether the customer’s payment plan should go into affect or whether it needs to be redone.

Also, be sure to follow through with any extra court proceedings that apply.

What Is the Likelihood of Success?

By attending the creditors’ meetings, you will get a picture of how much money the customer actually has. If the customer is hiding money and really does not have anything left, then your likelihood of collecting is probably unlikely.

However, if you customer is expected to get a raise, an inheritance, or is to win a pending lawsuit, then your likelihood of success will be greater.

Consulting an Attorney

Please consult a bankruptcy lawyer to help you go through the collections process. Additionally, the lawyer will help you assess the case to do a cost-benefit analysis of pursuing the customer.

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Last Modified: 12-15-2014 11:53 AM PST

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