I have a very close friend of mine who lives in IL and started up his own mechanic business. Apparently, one of his major clients just filed bankruptcy and they still owed him $40,000. Now his business is on the verge of collapse because he has very little cash left over to pay bills nor his employees for all the work they did for this client. Obviously, looking at it from the outside you think why the heck would you allow a bill like that to grow, but I'll neither pretend I know his business and situation. What I was wondering though, is there anything he can do to potentially save his company? Any chance of recouping the money owed to him? Anything he should do to try and alleviate the situation? Thanks.
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I'm sorry your friend has found himself in this awful situation. At a minimum, your friend needs to file a claim in the business' bankruptcy case. If the business is liquidated or reorganized by the courts, then your friend could get some to all of the money back (although it may take awhile for that to happen).
BK Forum focuses on consumer bankruptcy, not business bankruptcy. However, we do have several business owner members here in the forum - hopefully one of them can chime in with additional insights about what else your friend may be able to do.I am not a lawyer and this is not legal advice nor a statement of the law - only a lawyer can provide those.
06/01/06 - Filed Ch 13
06/28/06 - 341 Meeting
07/18/06 - Confirmation Hearing - not confirmed, 3 objections
10/05/06 - Hearing to resolve 2 trustee objections
01/24/07 - Judge dismisses mortgage company objection
09/27/07 - Confirmed at last!
06/10/11 - Trustee confirms all payments made
08/10/11 - DISCHARGED !
10/02/11 - CASE CLOSED
Countdown: 60 months paid, 0 months to go -
Your friend needs to find out what chapter of bankrutpcy this client filed. Was it personal bankruptcy or buisness bankruptcy? If it was personal bankruptcy was it a chapter 7 or a chapter 13? Will the clients buisness continue to function or is the buisness being closed?
All of those issues factor into weather or not your friend will be able to recoup any of his losses or not.Filed: 10/26/2006
Discharged: 03/05/2007
Closed: 5/19/2008 - Asset case due to balance transfer and income tax refundComment
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An even more difficult scenereo is one where a major client gets behind on paying and then catches up shortly before filing bankruptcy.
Can you imagine being contacted by the US Trustee's Office and being informed that you need to return the money because they've determined it to be a Preferential Payment?
I'll bet most small businesses don't even realize that this is a possibility and getting paid by a customer that's in trouble doesn't mean that you stay paid!
In this case he never collected the money so the pain doesn't seem as bad as having to return money you've been paid and spent already.
Hopefully he'll find a way to get by and hopefully he'll have some of the debt repaid.Discharged November 2008 100 days after filing no-asset Chapter 7. We intended to let a two-year-old vehicle go back to the bank and reaffirm an inexpensive ten-year-old SUV and our home mortgage. In the end we surrendered ALL of our vehicles and reaffirmed NOTHING. We'll "ride through" our mortgage after the court ruled it an undue hardship.Comment
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