No one likes to deal with a customer filing for bankruptcy, but it is an unfortunate part of doing business. We have written a few articles in the past on what to do when this happens. The main point we make is that the best thing you can do for both yourself and your business is to be proactive and timely in your actions. One of the first things that you should do is look into sending a reclamation letter.
What is a reclamation letter
A reclamation letter is a formal letter sent to your customer requesting the return of a recent shipment of goods. A reclamation letter is used when your product was delivered to your customer during the period immediately preceding their bankruptcy filing. According to the Uniform Commercial Code (UCC), the following conditions must be met for your reclamation claim to be valid:
- The seller sold goods on credit to the debtor in the ordinary course of business of both.
- The seller delivered the goods to the debtor at a time when the debtor was insolvent.
- The seller made a written demand for the return of the goods within ten days, or, in certain cases, twenty days after the goods were delivered to the debtor.
- The debtor had possession of the goods at the time of the reclamation demand or the goods were not in the hands of a buyer in the ordinary course or a good faith purchaser at the time of the demand.
What Should You include in a Reclamation letter
Your reclamation letter should include the following:
- A detailed description of the goods in question
- A statement of the delivery date to the debtor
- A demand for the immediate return of the goods
- A demand for an accounting of the whereabouts of the goods.
This last part is the most important, yet most often forgotten, part to include in your letter. If your customer sells the goods you provided them within the course of normal business, your reclamation claim will most likely no longer be valid. It is important to be thorough and precise in your letter. A vague or false claim made in the letter could be used by your customer to avoid returning the goods owed. You should also make sure you send the letter by fax or certified mail in order to have proof that your letter was sent.
We also recommend contacting your customer’s lawyer to request the immediate return of the goods. This does not replace the function of a reclamation letter, but it does ensure that your claim is being heard from multiple channels. Courts are currently divided on whether a reclamation letter alone enforces your reclamation rights. This means the more you can do to make your case the better. In some cases, it may make more sense to allow your customer to sell your product on the condition you receive an administrative claim in the bankruptcy proceedings.
As you can see, reclamation laws can be complicated and apply differently depending on the situation. For this reason, we recommend contacting a lawyer if you have any questions specific to your situations.