3 Things To Do When a Client Files for Bankruptcy

  • December 29, 2022
  • Posted by: Taurus Collections
  • Category: Blog
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Bankruptcy

Every business depends on its customers or clients for cash flow to sustain itself. In fact, their money is the lifeblood of the business owner and the employees. However, just like a blockage in the windpipe or food pipe can result in severe health issues, a disruption in cash flow can also make it challenging for a business to survive. 

Unfortunately, safeguarding your business is not as simple as regularly exercising and eating healthy; there are various obstacles down the road. You have to deal with bad debts and clients who have filed for bankruptcy. 

Read on to understand what to do when a client files for bankruptcy.

Cut off contact: If your client owes you money but has declared themselves bankrupt, cut off contact with them. No matter how tempting it may be to reach out to them and ask them to clear the dues, you should not do it. Under the law, creditors cannot communicate with the debtor if they have filed for bankruptcy. Instead, you can hire an experienced debt collection agency to discuss how to take the case further. 

Make an official claim: Several times, debtors’ obligations are way higher than their assets and resources. If that is the case, the official receiver or trustee will ask the debtor to provide the details of their debts. Some people may not have any assets, while others have assets but not enough to pay all the creditors in full.

Hence, the trustee decides on a pro-rata basis how much each creditor will receive depending on the number of their debts and total assets available. The secured debts are paid first, then the unsecured ones if some assets are still left. Therefore, you must always keep the documents and proof of all your transactions with the debtor to present to the trustee for a formal claim. You can ask a debt collection agency to help you determine how much money you can get back after discharge.

Wait for Discharge of Money: Usually, bankruptcy lasts only a year; it takes more than that to discharge all the assets and get them monetised. The trustee can also discharge assets not realised at the time of bankruptcy later to benefit the creditors. Your money will be repaid if the debtor has enough assets or source of income to cover them. 

Businesses should also consider hiring a debt collection agency like Taurus Collections that will help them recover their money and not charge a single penny if they fail to do so. Before choosing any agency, it is best to compare the charges and services they offer. 

About Us

Taurus Collections (UK) Ltd. can be your one-stop destination if you want to successfully boost your odds of collecting debts. Use our  Late Payment Calculator to calculate your outstanding credit amount. We help our clients with certain debt collection services that include:

For more details, call us at 0800 069 8777 or 01332 565 350 (Derby). Send your concerns to enquiries@tauruscollections.com. Connect on Facebook, Instagram, and Twitter.