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Customer bankruptcy

We have had several large corporations file bankruptcy this year. The largest hit us for $140,000.00. We have been recieving offers from liquity companies to purchase these recievables. Is this a good idea? Why not? We will probably never recieve payment for the services rendered anyway. One of the offers was for 78% of the amount owed. What is the best course of action?

5 Responses

  • Dec 29, 2009

    President

    I have heard a variety of responses to this problem. Though I don't have a clear answer, I would suggest also posing this question to the community forum at bizbuysell.com. Many business advisors contribute their expertise there and have experience with this dilemma that is effecting businesses nationwide.

  • Dec 29, 2009

    General Manager

    thanks for the info, I'll do that.

  • Dec 29, 2009

    Managing Director/Owner

    Depending on the value of your receivables credit insurance may be worth the expense moving forward. For those bankrupcy receivables not insured, yes do consider the offers, but shop around. Bankruptcy court establishes who gets paid first, second...; you should know where in line your receivable is with each company. good luck

  • Andrew Hopkins

    http://www.linkedin.com/pub/andrew-hopkins/2/360/47b
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    CPA at England & Company and Accounting Consultant

    (Jan 04, 2010)
    Check with an attorney regarding your company's order in bankruptcy settlement. If you are a secured creditor then you have a better position than unsecured and may have certain rights to bankruptcy estate assets that other secured creditors do not. If it is a re-organization it may be better in the long run to hold the recievables and go for a payoff. Why take half a loaf when with a little patience you can get it all and build a stonger relationship that will payoff in the future. If you decide to sell the receivables verify that there is no recourse and that you are not signing away more than the rights to the payment.

  • Marc Spangenberg

    http://www.linkedin.com/pub/marc-spangenberg/15/374/557
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    President at Biz Loan Central

    (Mar 23, 2010)
    Hopefully your problem has been worked out by now, but going forward you should take steps to make sure this doesn't happen again. One way is to outsource Accounts Receivable and have the credit of your clients monitored at all times. For roughly the cost of accepting credit cards, A/R can be monitored and insured.

What do you think?

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