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Our customers says they will file bankruptcy if we place them for collection, any suggestions?

In response to a threat to place one of our customers for collection, the debtor threatened to file bankruptcy. The customer said if they filed we would receive nothing. Any suggestions?

Answer: There are a number of steps to take. I recommend trying to assess whether or not the customer is bluffing by asking:

(a) For a copy of the company's financial statements so you can see how serious the debtor's financial woes are
(b) What type of bankruptcy they are considering filing
(c) The name and phone number of their attorney
(d) Whether or not they have contacted a bank about DIP financing, and
(e) When and where the filing will take place.

I urge my consulting clients not to under-react. I suggest that the credit manager place the account on hold, notify the sales department, pull back any orders in transit, and issue a reclamation claim for any goods recently delivered based on a creditor's reclamation rights under the Uniform Commercial Code.

 
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