6 Steps to Take When a Customer Files for Bankruptcy

31 Mar

As a business owner, you always hope your customers will be financially stable and able to pay. Unfortunately, some customers will end up filing for bankruptcy. This can be a stressful time, especially if it was one of your more important customers. You may be asking yourself “What do I do now?” or “How do I prevent this situation from getting worse?” Here are six steps to take when you are notified that a customer filed for bankruptcy.

1. Arrange for all goods in transit to not be delivered

Depending on how you deliver your product and conduct business this could be as simple as an email or it could involve a more complicated process.

2. Make sure all future shipments are canceled

Again this could be easier said than done, depending on your arrangements.

3. Check to see if you can submit a reclamation notice on already delivered products


Once those future product shipments have been handled, look back on past orders. If any shipments were sent within the 45 days prior to their bankruptcy filing, submit a reclamation notice to the customer as soon as possible. This may allow you to recover a portion of your product.

4. Check to see If a payment was received within 90 days of the customer filing for bankruptcy

If one was, their may be grounds for the bankruptcy trustee to declare it a preferential debt payment. This would allow the court to clawback any payment received within that time frame.

5. Determine how much the customer owes and collect all financial documentation to support this claim

You should begin organizing all financial documents related to this customer in order to be able to provide sound financial proof of the the debt owed to your company.

6. File a proof of claim with the bankruptcy court.

There are many important things to note with this. Make sure you include the required supporting documentation with your claim. Make sure you send the proof of claim by registered mail, with a return receipt requested. You should contact the court to make sure the documents were received after an appropriate amount of time. It is always a good idea to keep duplicate copies of all documents in a secure place in case the court misplaces the originals


No one likes to deal with a customer filing for bankruptcy. It can be a long and tedious process for everyone involved. The most important thing you can do though is be proactive and try to get ahead of curve. It may seem confusing at first, but the situation will only get worse the longer you wait to deal with it. As always, if you have any questions or concerns contact a lawyer.


2 Replies to “6 Steps to Take When a Customer Files for Bankruptcy

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