Customer prepayments and inability to refund...

[brokenomore]

I am in a situation where I have fallen behind in some of the work I have been hired to do, and some customers are asking for refunds of advance monies paid.

I want to finish the work, but I cannot afford to repay them. Their advance payments have been absorbed.

Will a bankruptcy absolve me of the requirement to refund their payments?(Note that I do not want to just walk away from them. They are customers and I feel horrible about doing this, but I need some protection from any collection activities. I will still be doing the work for them--just later than what we originally planned). Would filing stop chargebacks from their credit card payments?

[HHM]

If they are requesting refunds, what are the odds the customers are going to allow or want you to complete the work.

I am not 100% certain if a BK can stop charge backs, strictly speaking, that is not an attempt to collect a debt against you. A charge back is between the card holder and the underwriting lender. Your issue would be between you and your merchant bank.

What sort of "work" are we talking about?

[brokenomore]

If they are requesting refunds, what are the odds the customers are going to allow or want you to complete the work.

They are requesting refunds because they think the work will not get done at all. I have unfortunately had some other cases in the past when work was done late, and they were happy to have it done, and I gave extra service to make up for it.

But the question remains...if they have made advance payments, and the work remains undone at the time of filing, can they still demand a refund?

[brokenomore]

I'd rather not say what the work is I do, but this is comparable.

Let's say I had a contract to make $5,000 worth of chairs, and was given an advance payment of $2,500 to do the work, but because of slow conditions and other pressing expenses, this money got used up before I could make the chairs, and now I'm behind in schedule and they want their money back.

Would a filing prevent them from collecting it?

[HHM]

You don't need to mention specifically, what you do (in a way that identifies you), but what has been contracted for can make a difference in the analysis.

A BK filing would place the burden on your customers to object to the discharge of the liability. So in that respect, it would at least temporarily stop collection. However, I suspect that if they did object, they would win under section 523(a)(4), as what you describe is a type of fraud and embezzlement.

Also, as I said above, I do not think a bankruptcy filing would prevent the customers from doing a charge back on their credit card.

[AngelinaCatHub]

You don't need to mention specifically, what you do (in a way that identifies you), but what has been contracted for can make a difference in the analysis.

A filing would place the burden on your customers to object to the discharge of the liability. So in that respect, it would at least temporarily stop collection. However, I suspect that if they did object, they would win under section 523(a)(4), as what you describe is a type of fraud and embezzlement.

Also, as I said above, I do not think a bankruptcy filing would prevent the customers from doing a charge back on their credit card.

I have to agree with HHM in all. However, IF you go to the customer, tell them your plight in all honesty, state to them that you will do them a very good job albeit, late, and you will offer one extra (small) gift job as recompense, some or all of them might bear with this, BUT you must make a firm commitment and show up on that date. DO and FINISH one job at a time, the oldest first. Just a suggestion, it won't work if you don't try it, what do you have to lose? 'Hub

[brokenomore]

I have to agree with HHM in all. However, IF you go to the customer, tell them your plight in all honesty, state to them that you will do them a very good job albeit, late, and you will offer one extra (small) gift job as recompense, some or all of them might bear with this, BUT you must make a firm commitment and show up on that date. DO and FINISH one job at a time, the oldest first. Just a suggestion, it won't work if you don't try it, what do you have to lose? 'Hub

This is exactly what I have done already, and 90% or more of the time it is well-received.

However...before that time, there is nervousnous, and they want their money back and don't think I'll really follow through, and I don't have the money to pay them back. Can BK help with that?

[HHM]

This is exactly what I have done already, and 90% or more of the time it is well-received.

However...before that time, there is nervousnous, and they want their money back and don't think I'll really follow through, and I don't have the money to pay them back. Can BK help with that?

Well, your really not giving us enough detail to go on (how much money are we talking about, what sort of "work" is this, etc). So, the answer is "maybe, but probably not." But a bk would give you a "layer" of protection in that it would require the customers to take a proactive step to get their money (i.e. file an objection to discharge) which they may or may not be sophisticated enough to realize.