Deciding how to respond to unpaid, aging and doubtful accounts receivable is a critical business decision. However, a prudent policy regarding collection practices should always be informed by the potential affect of a bankruptcy filing of a major customer. When indications suggest that such a customer might be insolvent, the intuitive move might be to quickly tighten credit terms, force the customer to pay a portion of its outstanding balance with all new orders or require the customer to pay cash.
A well developed collections practice anticipates bankruptcy fillings. The Federal “preference” and “fraudulent transfer” statutes, could place your business in the undesirable position of having to return payments to a bankruptcy estate even when that debtor still owes you or your business a significant debt. Whether you’re reacting the bankruptcy filing of a major customer or believe that a customer owing a substantial debt to you may be preparing to file a bankruptcy case, you should promptly contact the insolvency professionals at Robleto Law.