Some company owners write off client debts as soon as they learn they have started the bankruptcy process. Unfortunately, this makes them lose the money they rightfully deserve. This explains why you should not be in a hurry to write off client debts. Instead, contact a bankruptcy lawyer for advice on the legal process you should follow to recover your money. They will take you through bankruptcy laws to enable you to understand your rights. They will then advise you to take these steps to protect your bottom line.  

Determine the Bankruptcy Your Client Has Filed

Start by determining the bankruptcy your client has filed and get an explanation from your lawyer on how it will enable you to get your money back. For example, if your customer chooses chapter 11 or 13, they will present a payment plan in court showing how they will pay your debt. In addition, they must make the payments as agreed until they pay back all your money. This information will enable you to know the progress your customer has made and whether there is a possibility of getting your cash.

Chapter 7 is slightly different and might enable you to get your money faster if your customer files it. In this case, the courts will distribute the property not protected by your client's bankruptcy among you and other creditors. You can get all the information you require about your client's bankruptcy filing process by requesting the relevant notice. They will let you know the bankruptcy type your client has filed, the filing date, and the filing deadline. Your attorney will review the notice and advise you on what to do next.

File a Proof of Claim

If your attorney realizes that there is a possibility of recovering your money, they will advise you to file a proof of claim. Doing so will demonstrate your willingness to be part of the bankruptcy proceedings. In addition, the court might ask you to provide certain information to enable them to verify that your client owes you money. For instance, you might be required to provide contracts, business records, and information showing your communication with your client. Failing to provide this information puts you at risk of failing to recover your debt. However, when you provide the court with the relevant documents, the bankruptcy trustee will pay your debt after completing the bankruptcy proceeding.

If you were contemplating writing off debts from a bankrupt client, you now have reasons to rethink your decisions. You can recover part of the amount they owe you if you follow the legal process. Therefore, consult a bankruptcy lawyer for guidance on how to recover your money.