Q: One of my customers owes me several hundred dollars and
is telling me he filed bankruptcy. Is there anything I can do to get my
money?
A: If you haven't received a notice from the
Federal Bankruptcy Court, verify the filing by calling the bankruptcy court in
the customer's city. If your customer was incorporated, the bankruptcy will be
under the corporate name. Sole propretors would file under the owner's name with
a DBA in the business name.
Find out if the filing was made under a Chapter 11 (business reorganization),
Chapter 13 (personal reorganization) or Chapter 7 (liquidation).
Once a bankruptcy is filed, there isn't a great deal you can do. It takes a
few weeks for you to receive notice from the bankruptcy court. Fill out and
return the notice so you'll be on record to receive any moneys that may be
distributed.
Any other steps you take will depend on how much money is owed and whether
you're a secured or unsecured creditor. A secured creditor has collateral
pledged (such as when a bank collateralizes a loan with a building). These are
the first debts to be paid; in many bankruptcies there isn't anything left over
for anyone else.
Most creditors are unsecured, which means they don't have any security
pledged against the moneys owed. Although you should do everything you can to
get some money out of the bankruptcy, in reality about all you can do is put an
imaginary curse on the debtor, and kiss your money goodbye.
If you're owed thousands of dollars or hold a secured position, discuss the
situation with an attorney who can advise you if you have any alternatives.
However, the chance of getting any money is usually pretty slim. In any case, if
you have any questions about the bankruptcy procedures and your rights, talk
with your attorney.