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	How To Expand Your Small Business
	Article 8: When To Be Wary Of A Paid Debt Given the expense, hassle and probable poor return involved in pursuing the so-and-so debtor through bankruptcy court, the most natural thing is to press even harder to get your money as soon as a customer starts making noises about insolvency. But be careful of success, attorneys say. “It might be a detriment if you collect, and they do go into bankruptcy. Windows differ from state to state, but generally if you collect within 90 days of the bankruptcy filing, you may be required to give it back as a ‘preferential payment,’” notes Rosemary Taft-Milby, an attorney who manages the litigation and defense department in the Cleveland, Ohio, office of Weltman, Weinberg & Reis. “The trustee almost has to go back” and examine recently paid invoices, explains Kimberley Tyson, a bankruptcy attorney with Denver’s Sherman & Howard law firm. “The creditor has done absolutely nothing wrong. The idea is that it is unfair for some creditors to be paid while others aren’t.” She adds, however, that the mandate applies only to outstanding debts greater than $5,475. Below that limit, you’re probably safe from a preferential payment claim. Should you get socked with an allegation of preferential payment—which could come even two years after payment was received—there are defenses. You’re OK if you can, first, show the court that the transaction was in the “ordinary course of business”—something the debtor would routinely buy to keep the business running, such as office supplies; and second, prove from records that the invoice was paid in the customer’s usual timeframe. To prove that, it’s vital to gather all client records at the first whiff of potential bankruptcy. Keep documents in hard copy to avoid the automatic delete feature of some software systems, and file them for at least two years. Even though most bankruptcy threats are just that, say the experts, once you hear of a possibility, seek out a bankruptcy lawyer’s advice immediately—and especially before pushing even harder to collect the debt.