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Creditors and Bankruptcy/contracting with a company on the brink of bankruptcy

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Expert: Michael Brotherton - 2/28/2009


Question
I've been contracting for the same company for about 5 years and they've never missed a payment.  About 6 months ago they asked to change from net30 to net60. Now they are asking for a single invoice a month rather than weekly, effectively delaying payments further. I'm just an individual contractor.

There are rumors that this company is going bankrupt.

My question is what contractual tools or negotiating power do I have knowing that this company might be headed for bankruptcy?  Would it be unusual to ask for a higher rate or for a retainer?  What can I do to mitigate the risk of having my payments tied up in a bankruptcy settlement?  Thanks!

Answer
At this point it is speculation that they are filing bankruptcy until you have evidence to support it. ALthough their actions may indicate they are struggling it would be difficult to predict. If they do fle bankruptcy you may have trouble getting your money, period. YOu are unsecured and even if you have a contract it may be invalidated if they file bk. If they are a larger corporation they have to file a Chapter 11 bankruptcy which is a reorganization of the ir debt which may enable them to pay you but under terms that may not be favorable to you, only them. They could reduce the amount they owe you or take their time in doing so.

One of the best ways to deal with a situation like this is to go to them directly and ask. Express your concerns and let them know you are dependent on their prompt payment as you are an individual not a large company. Let them know that unless they are willing to give you some assurances or a premium payment you will have to go elsewhere. Be direct but dont burn your bridges.

Creditors and Bankruptcy

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Michael Brotherton

Expertise

Consumer/Debtor Rights Advocate. Mike Brotherton is a negotiator with over 30 years experience in consumer lending and collections. Mike has 30 years in the credit and collections industry as a former loan officer, debt collector and manager of two finance companies over several years. We are well versed in Loss Mitigation practices and the legal collection process. We have helped literally thousands of people over many years overcome serious financial problems such as foreclosure, creditor lawsuits and abuse by debt collectors. For more information about resolving your "financial emergency" visit www.financialemergency.com. We actively promote Fair Debt Collection Practices and other consumer protection laws. We teach DEBTOR RIGHTS and enforcement of those rights. The more informed you are of your rights and the credit collections practices of creditors the more peace you can have dealing with your FINANCIAL EMERGENCY. Most financial problems are fairly common and as such have some very common solutions. The key is understanding your rights in the collection process and how to enforce them if need be. Primary business- Debtor Rights Advocacy and Debt Mitigation relating to foreclosure, creditor lawsuits, and other serious financial problems. www.financialemergency.com (copy and paste in browser).

Experience

28 years in financial services industry as a loan officer and debt collctor. Developed bankruptcy and loss prevention manual for large finance company for manager training. 15 years as a debt counselor and consumer advocate.

Education/Credentials
Veterans sponsored OJT Manager Candidate Scool for AVCO Financial Services, Keystones to Management for ITT Financial Services, Certified Finance Management for Associates Financial Services.

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