|
 Print Friendly
 Email to Friend
|
|
How to Collect Business Debt
|
|
Article 6: “I’m Filing for Bankruptcy”
If the debt remains uncollectible for much too long, don’t be surprised if the client ultimately says he’s filing for bankruptcy.
Don’t automatically believe him. The threat of bankruptcy is often a bluff.
“A lot of people threaten bankruptcy in hopes a creditor will back down,” says Kimberley Tyson, a bankruptcy attorney with Denver’s Sherman & Howard law firm.
Even when the client is sincere, the actual filing rarely happens, she adds. “When they talk with a bankruptcy attorney, they find out just how onerous it is. A lot of businesses look at it and change their minds.”
The reason?
“It’s an uncomfortable process, in that business assets are physically turned over to a trustee, and that trustee decides what can and can’t be taken,” explains Darrell Cook of Darrell W. Cook & Associates law firm.
“Bankruptcy is highly regulated, and it’s not something the average company wants to experience.” In Cook’s Dallas practice, only about 10 percent of those who threaten bankruptcy actually follow through.
Bankruptcy is also expensive, not a trifle invoked to scare off creditors.
In Chapter 11 bankruptcy, where a company intends to continue operating, a bankruptcy plan must be drafted, creditor’s committee established and on and on.
In Chapter 7 liquidation, the business shuts down and the assets are sold.
“I don’t see companies declaring bankruptcy just to stave off unpaid bills. If they intend to stay in business, bankruptcy is not a viable option,” Cook says.
|
|
|
|
|
|
|
|
|
|
|
