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Lane
Lane , JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 9203
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
1929974
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We never have had any receivable problems, however we now have

Customer Question

We never have had any receivable problems, however we now have a customer (for over 20 years) that owes us approx $20,000 and just informed us they are going out of business and will not have the funds to pay their unsecured creditors. They have not filed bankruptcy as yet and we have no idea if they will. Looking for suggestion as to whether this should go to collection agency or the law firm we use? May I have your comments?
Submitted: 3 years ago.
Category: Finance
Expert:  Lane replied 3 years ago.

NPVAdvisor : Hi, sounds like the attorney needs to be your first stop ... He may have ideas as to how to get you on their secured creditor list. That collection agency, especially if you can't get included, may just be an incremental cost for no result
NPVAdvisor : anotherresult another thought: take aban,ruptcy attorney up one of this free consit
NPVAdvisor : lthey're always offering
NPVAdvisor : but, again, if your attorney has bkrptcy exp, you might start there
Customer:

Not certain if attorney has bankrutcy experience as we nver ha to use him for same. Good point about consultation. It has been a while since I had to deal with collection agency, but I thought they usually do not collect fee unless they collect and then it is usually a significant portion

NPVAdvisor : Good point .. Might not hurt, but many times getting in the bankruptcy process with them, becoming part of the creditor committee can at least keep you in the loop
NPVAdvisor : You might even mention to them the idea of a prepak
NPVAdvisor : where the company pre-negotiates creditor settlements and takes them to the bankruptcy court ... Saves them money and LOTS of time... Again possibly another way to keep you in the loop
Customer:

Yes however they have not indicated they are filing bankruptcy . . . only closing business. I searched through PACER to see if there were any actions, but none indicated.

Customer:

We do not have any information regarding who they may be using for legal representation if any

NPVAdvisor :

Well, here's a thought, if you really feel that they just don't have the cash and won't, (this is kind of out there), but what about being pro-active and seeing if they'll barter with you ... are there assets, (hard or soft), equipment, client/customer lists anything at all that might be of value to you that you might be able to use to settle, before they just "high-tail it and run?"

NPVAdvisor :

OR possibly work off the debt by providing some sefvice you need

NPVAdvisor :

Just did a search and it appears that there may be Lawyers in your state that will work on contingency (and my gut is that they may be more creative, know more avenues, etc. than the typical collection agency)

Customer:

I believe everything has a lien on it (UCC filings), but that is a great idea, thank you.

NPVAdvisor :

ahhh

NPVAdvisor :

Do you mind my asking what is you( and their) business?

NPVAdvisor :

are you still there?

NPVAdvisor :

Looks like you may have stepped out of the chat .... I'll give it a few, and then switch to Question and Answer mode ... We can still continue the dialogue (brainstorming), just not in real-time ... but back to your original question, I think a phone consultation with your attorney should be the first stop

NPVAdvisor :

 



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Lane and other Finance Specialists are ready to help you
Expert:  Lane replied 3 years ago.


Hi, I switched to Q&A mode because sometimes the site just quite responding.


Let me know if you wan to discuss further.


We can certainly talk about the schools of thought around when to write off bad debts for tax purposes.

There is no real IRS criteria, other than the understanding that you should not write it off until you truly believe that it's noncollectable.

Also, depending on your tax structure, if your business is a pass-through (LLC, partnership, s-Corp) or a c-Corp, you may want to look at whether you want to keep it on the book until next year or not. (That's actually a thought, regardless of your tax structure)

Let me know.

Otherwise, positive feedback (or an “accept”) is highly appreciated. That’s the only way we’re paid. BUT, if you need CLARIFICATION, COME BACK here. Also, feel free to bookmark this page to come back for reference.


Lane


Expert:  Lane replied 3 years ago.

Thanks for the feedback and bonus, Paula!




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... enjoyed working with you,

Lane