Whether your company is large or small, sooner or later you will experience the pain and apprehension that come from receiving notice that one of your customers has filed bankruptcy.

Bankruptcy can be a tough issue, especially to the small business owner whose customer has fallen on hard times. Problem #1: You’ve likely lost a customer for your products or services. Problem #2: You’ve likely lost the ability to collect the money the customer still owes you. Problem #3: The future potential bankruptcy “preference” may pull even more money from your coffers, as a Smart Business article points out.

The bankruptcy of another means their ability to pay you is severely compromised, unless you’re “secured.” However, what if you were paid and the payment is deemed to have been a “preference” by the bankruptcy trustee? If the bankrupt company made a payment to you on or before the 90 days prior to filing for bankruptcy, then such payment becomes recoverable as a means of squaring away obligations. Bottom line: The trustee can take the payment back from you.

If this happens to you, then you aren’t without options. Nevertheless, it does demand your full attention and cannot be ignored. The original article goes into considerable depth, but here is my take-away for you: find competent legal counsel to plead your case and run through the numbers.

Reference: SmartBusiness (July 1, 2011) “What to do when faced with a bankruptcy preference demand

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